Companies are still failing on pay equity

It seems Corporate America has not yet gotten the memo on pay equity. A new study from The Josh Bersin Company, called The Definitive Guide to Pay Equity: Increasing Productivity, Innovation and Sustainability, says that 95% of companies are failing to achieve the highest level of pay equity maturity. The other side of that coin is only 5% excel in pay equity.

According to the report these companies either overlook the issue of pay equity until it becomes a legal liability or they engage in sporadic projects that address pay equity in a piecemeal fashion.

“While most companies know they must increase pay during times of inflation, they do not understand the problems they create when people feel the system is unfair,” notes Josh Bersin, global industry analyst and CEO of The Josh Bersin Company. “Most employees know that they are paid for performance, but when they perceive unfair practices (due to bias, racism, sexism, or simple politics) they lose confidence in the company and their sense of trust is damaged. The result is more politics, turnover, and low levels of engagement.”

For the companies that excel in pay equity, they are able to achieve impressive results, including:

• 6 times more likely to meet or exceed financial targets
• 1 times more likely to attract the talent they need, and
• 7 times more likely to innovate effectively

“Considering that pay equity has been on the agenda for around 50 years, it’s shocking that as many as 95% of companies are not accomplishing the highest level of pay equity maturity,” explains Kathi Enderes, senior vice president, research and global industry analyst at The Josh Bersin Company. “Half of the companies are only addressing pay equity to mitigate legal issues, while 37% view pay equity work as a sporadic process conducted once a year.”

Other findings from the report state that only 21% of companies listen to employee feedback on pay equity and only 15% are willing to communicate what’s required to address the pay equity issue. Also, new technologies to help spot pay inequities are not well adopted and only 14% of companies are actively using data and equity platforms to pinpoint problems.

Related: Majority of workers believe their company has pay gap issues that are going unaddressed

Despite a strong commitment among employers to address pay inequality, there is also a significant gap in execution. Seventy-one percent of CHROs and the C-suite see pay equity as a critical component of their people and business strategies. However, just 14% of organizations dedicate sufficient budget to effectively tackle pay equity issues.