Advancing pay equity: 3 strategies to improve pay gaps

When it comes to organizational dynamics, few issues carry as much nuance and sensitivity as pay equity. It is not merely a matter of fairness but a strategic imperative that can shape the very fabric of a company’s culture and performance. Recent data from an XpertHR report found that 50% of respondents feel pay inequities exist in their organizations, demonstrating the prevalence of the issue. Pay gaps within an organization, whether based on gender, race, ethnicity, or other factors, not only undermines employee morale and trust but also exposes organizations to legal risks and operational inefficiencies.

While preventing potential legal and operational implications are clear reasons to address pay gaps, there are also tremendously positive effects of closing pay gaps, aside from just the right thing to do that companies cannot afford to overlook. The business benefits range anywhere from increased employee engagement and retention to enhanced productivity. Nevertheless, progress toward closing these gaps remains slow, with the gender pay gap in the US barely narrowing over the last two decades, and racial gaps even further separated, with Black and Hispanic women in the U.S. earning just 70% and 65% as much as White men, respectively. Additionally, the Department of Labor found Black and Hispanic people make just 76 cents and 73 cents respectively, compared to white people, highlighting the need for continued efforts to address these systemic problems in the workforce.

To address these issues effectively, leaders, with the guidance of HR teams, must recognize that achieving equitable pay practices requires more than just a checkbox approach. Through strategic actions, leaders can create more equitable and inclusive systems that advance a people-first culture and improve business outcomes.

A systematic approach to organizational equity

Creating fair compensation practices starts with evaluating job roles across the organization. This entails a review of job descriptions, performance metrics and salary data. Leveraging the expertise of auditors or utilizing pay equity technology that can measure pay fairness in relation to industry benchmarks and government standards will help to pinpoint pay disparities rooted in factors such as gender, race, or age.

After the audit follows remediation, and leaders may prioritize immediate resources to the legal needs and implications of any gaps, followed by prioritizing action items tailored towards decreasing gaps overall. Securing additional budget may be necessary to address significant inequities, especially if immediate action is required. Taking a proactive, but strategic approach, such as adjusting salaries over time, can also move progress forward toward achieving pay parity without exceeding current budget constraints.

Finally, operational deficiencies that led to the initial salary discrepancies should be corrected. This may involve reassessing job classifications and ensuring accurate salary records as pay gaps often resurface due to factors such as employee turnover, organizational restructuring and shifts in job responsibilities. Incorporating periodic spot-checks of compensation and rewards data annually, at minimum, along with more thorough reviews on a regular cadence should be inherent components of an organization’s pay equity strategy.

Make managers your pay equity champions

Empowering managers to lead the charge for pay equity is critical to propelling the entire organization forward. According to recent research from XpertHR, which recently rebranded to Brightmine, only 12% of employees say managers at their organizations are very effective at facilitating conversations about pay. Even more alarming, 22% of employees say their managers have no conversations with them about pay. The communication gap between managers and employees, often caused by a lack of understanding of the organization’s pay equity strategy, not only diminishes employee trust but can also worsen pay equity concerns within the workplace.

Leaders can overcome this obstacle however by taking proactive steps. First, they should empower managers with the necessary resources to address pay equity as a strategic business priority. This includes access to training on unconscious bias prevention, materials on company policies and procedures, and regular updates on industry standards and legal requirements. It’s also crucial to work with managers to conduct regular policy reviews, to help them understand how different regulations may impact employee conversations. By arming managers with the tools they need, organizations lay the groundwork for productive conversations that drive progress in pay equity.

Once managers have a clear understanding of pay equity processes, policies, and goals, leaders must hold managers accountable through both qualitative and quantitative means. This involves establishing clear success metrics (such as team sentiment, employee engagement and turnover), leadership initiating regular check-ins, soliciting input from employees, synthesizing feedback, and defining actionable strategies for improvement. By implementing these measures, organizations can bridge the communication gap, foster transparency, and make meaningful strides towards achieving pay equity.

Utilize data to monitor & improve outcomes

Reviewing data and analytics is imperative to fixing pay inequities and moving toward parity. Recent XpertHR data found that that just half of HR professionals agree (33%) or strongly agree (20%) their organization analyzes and leverages data to improve pay equity, highlighting a clear area for improvement to implement a data-driven approach into pay equities practices. This quantitative approach allows leaders to identify, and tackle pay disparities at the source through methods such as a regression analysis. Using factors such as role, performance, location, and organizations can quantify differences or improvements in pay.

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

Integrating pay equity technology into operations enhances efficiency, accuracy, and fairness, providing leadership with evidence-based insights to uphold equitable pay practices. Making pay decisions based on data rather than intuition, organizations can instill confidence in leadership, foster accountability among managers and mitigate bias.

Embrace equity strategies for a sustainable change

Leadership plays a pivotal role in advancing pay equity strategies within organizations, enhancing its significance not only for business success but also for building an inclusive culture. Organizations that neglect pay equity challenges could face more significant issues in the future such as employee frustrations, legal consequences, ethical issues, damaged brand reputation or challenges recruiting.

By moving pay parity forward through evaluation and effective remediation, making managers pay equity champions and employing data-drive strategies, organizations can pave the way for lasting change, contributing to a future where pay equity is not just an aspiration but a reality.

Sabina Mehmood, Pay Equity Leader, Brightmine