I recently read an interesting study regarding how companies are ensuring they are paying their employees equitably. This study was conducted in 2021 and surveyed 1,094 HR professionals. Equal compensation for equal work is not a new idea, yet even in 2021 the majority of companies are not doing this well. Research shows that women earn $0.98 for every $1.00 earned by men. Black women earn $0.97 and black men earn $0.99 for every $1.00 made by white men. These pennies may seem insignificant but when you multiply them over a 40-50 year career it can mean a difference of thousands or even hundreds of thousands of dollars. No longer an insignificant number.
The good news is that 58% of the organizations surveyed do conduct voluntary pay equity reviews. It was interesting to me that organizations with female owners or CEOs are more likely than organizations with male CEOs to conduct pay equity reviews. 67% of female run companies vs 55% of male run companies. I wonder if these women have experience pay inequity in their careers and they are trying to treat their employees better than they were treated.
The study also compared employee trust with pay equity reviews. Of the employees who feel their organizations are transparent around compensation, 91% of them trust that their employer is paying employees equitably across genders, races and ethnicities. When an employee feels that their organization lacks transparency, 49% of them do not trust that their employer is paying employees fairly.
For pay equity reviews to be effective, they will need to be part of an ongoing and committed practice towards fair compensation practices. This is not a once and done type of thing. Among the organizations already conducting pay reviews they are doing so informally and primarily in-house. This doesn’t have to be overly complicated. But it is going to require accurate data on employees and the reasoning behind salary decision making.
What are the ramifications of an employee uncovering an inequitable pay practice on their own? This is very likely to happen if employers aren’t being proactive to address inequities up front. Two-thirds of these employees are going to take some form of action to rectify the situation. That could be requesting a pay raise, looking for a new job, inquiring about this from their supervisor or HR. 33% of employees stayed quiet about the information. I’m sure those 33% of employees also lost a level of trust with their employer. 19% of employees are also likely to talk to other colleagues about the pay inequity. This is another action that erodes employee trust in the company and negatively effects company culture.
Fifty six percent of employees fall into the category of requesting a raise or looking for a new job. Both of these options cost the organization money and trust. How much better would it be for the company to conduct their own audit of pay practices and proactively compensate employees equitably? Now the organization is spending the same amount of money and building trust amongst their employees. Employees in this type of organization are going to be more likely to stay for the long term. Isn’t that something we are all trying to encourage in the midst of this Great Resignation?
Are you conducting pay equity reviews? Maybe now is the time to start thinking about that.
Jennifer Webster SHRM-CP