How employers can develop pay strategies that benefit their business and employees

Pay equity has been a long-pressing issue in the workplace, and it’s becoming an even bigger priority as calls for fair pay grow louder nationwide. As President Biden announces new executive orders to create equitable pay and more states like Colorado introduce pay transparency laws, employers must have compensation strategies that abide by new legislation and meet employees’ expectations.

According to Gartner, 72% of leaders believe that pay equity is a high or very high priority, yet just 34% of employees believe their pay is equitable. This disconnect should be a wake-up call for employers to start understanding why pay equity matters and begin building (and communicating) equitable and transparent pay structures.

Pay equity can bring positive changes to your organization

Pay equity and transparency improve workforce recruitment and employee retention, build deeper trust and connection among the workforce, and strengthen workplace culture. While these benefits are table stakes for employees, employers also realize benefits from pay equity, including:

• Greater organizational trust: As pay gaps persist, employees want to feel secure that their compensation is free of bias or partiality. And that trust is crucial for employers since 80% of employees who trust their employers feel more motivated at work. Unfortunately, that trust won’t form until employers show (not just “say”) their commitment to pay equity and provide actionable steps to improve honest, proactive communication around pay.
• Increased talent attraction and retention: Pay is often an employee’s deciding factor when choosing whether to stay in their current role, with over a quarter (28%) of employees admitting low or unfair pay is one of their top reasons for quitting. At the same time, 75% of job seekers say they’re more likely to apply for a job that’s transparent about pay. By taking steps as simple as including accurate salary ranges in job descriptions, for example, employers ensure their candidates understand their compensation from the start.
• Stronger company culture: 43% of employees don’t feel valued by their employer, which can stir up feelings of resentment and lead to greater disengagement. Employers can prevent or change this mindset by creating a culture of equity and encouragement by empowering open conversations around pay, benefits, and performance.

Employers can take small steps to increase pay equity, but to truly realize its benefits, employers must make a genuine, long-term commitment to fair, equitable pay.

Beyond the benefits: Employers must ensure regulatory compliance

Pay equity is gaining global traction and driving a growing number of transparency laws worldwide. Multiple U.S. states are now aligning with this movement, catching up with the significant progress already made by their global counterparts. More than 10 U.S. states – from New York to Hawaii and more – have implemented regulations in the past few years. For example, in New York, employers with four or more workers must share pay ranges for job openings and promotions, causing more workplaces to open up about their salary ranges.

This type of regulatory pressure requires companies to report gender pay gap statistics, institute policies to mitigate discrepancies, reduce any existing gaps, and more – or risk significant fines. It’s no longer a matter of if pay transparency laws will take effect at the state (and global) level, it’s when – and many employers are proactively planning and evaluating how they are closing pay gaps and making strategic compensation decisions for the future.

To prepare and stay ahead, many employers are taking proactive steps to create a culture of ongoing fairness and transparency, starting with simple changes like sharing salary ranges in job postings, which 72% of employers already do regardless of any legal requirements.

Beyond salary transparency, employers are also proactively conducting pay equity analyses to identify any issues in compensation strategies. Assessing pay equity requires specialized solutions employing techniques such as multi-regression analysis to accurately detect bias and identify factors driving pay. However, this approach is tremendously beneficial to proactively correct wage discrepancies and ensure fair pay based on the employee’s role, experience, and performance – not their sex, gender, or race.

Related: Women doubt progress on pay, promotions: Study reveals gender gap in perception

As employers continue making changes that improve pay transparency, they should consistently communicate their work and maintain an honest and open dialogue with employees. This is one area employers should prioritize since just one-third (32%) of managers say they have conversations with employees about pay. There are many different channels and approaches employers can consider to improve communication with employees, such as hosting regular town hall meetings or Q&As, encouraging managers to discuss pay in one-on-one meetings, creating a channel where employees (who may be shy to raise their hand) can anonymously share their questions and concerns and more. Moving forward, it’s crucial to establish an open line of continuous, consistent communication around the company’s pay strategies.

Above all, a genuine commitment to pay equity begins with an employee-first approach, especially as more employees and lawmakers strengthen their calls for pay equity. With a better understanding of the importance of equitable pay, preparing for new regulatory mandates, and communicating pay equity work to employees, employers can maintain retention rates and organizational trust, building a fairer work environment for all.

Tanya Jansen, Co-Founder, beqom