Leaders in business and HR say pay equity is becoming integral to the success of companies in 2022 and beyond.
JD Supra reports, “Pay equity, transparency, employee well-being, and inclusion are the new frontiers for employer-employee relationships.”
The data confirms this philosophy has taken root on a broad level as well: A recent survey shows that a sizable 66% of organizations plan to conduct a pay equity analysis in 2022. This marks a 20% increase over last year.
Organizations are performing such analyses for good reason.Pay equity audits shed light on where employers are doing well in their compensation practices and identify opportunities for improvement. An employer’s ability to proactively resolve any issues impacts both its business’s reputation and bottom line.
To further drive the demand for pay equity, current trends show that workplace equity is no longer optional for employers, thanks to emerging laws. The legal landscape has been shifting in recent years, with states,federal authorities, and local jurisdictions across the country progressively passing laws that bolster equal pay for equal work.
While compliance is an important piece of the discussion, legalities aren’t the only reason businesses should prioritize equitable pay practices.
Benefits of pay equity
Studies show centering values on diversity, equity, and inclusion (DEI) is a savvy business decision. In fact, organizations that make it a priority are 1.6 times more likely to meet or exceed financial targets and retain customers.
For example, focusing on DEI boosts employee engagement, increases employee fulfillment, builds employee loyalty, and helps foster an inclusive culture, which leads to less turnover and greater organizational efficiency. Ultimately, this improved performance helps attract investors and positions your brand as a forward-thinking organization.
In short, DEI initiatives boost increased staff morale, which leads to higher job satisfaction and better results. Below are some key findings that prove the business case for pay equity and DEI:
82% of U.S. consumers will purchase from a brand that they can trust, and that includes being honest and transparent about pay equity.
Over 80% of workers are more productive when they’re paid fairly, and higher productivity means higher profitability for organizations.
Employers may be reluctant to focus on DEI initiatives like pay equity for fear that employees who find out they are earning less than coworkers with the same experience or title could result in a significant drop in motivation and increase the desire to look for employment elsewhere. That shouldn’t discourage you from making pay equity a priority. In fact, just the opposite because transparency helps your organization in the long run.
The role of pay transparency
Pay transparency is a key element in the overarching theme of pay equity. That’s because the simple act of talking about pay helps eliminate gender and racial pay gaps. Andjob seekers are 68% more likely to apply for a position if it lists pay. If that’s not reason enough for transparency, aCNBC article cautions, companies that refuse to be transparent about pay will be ‘under fire’ going forward. Apple, for example, was recently criticized for shutting down employee-circulated internal pay surveys.
Pay transparency is essentially being upfront about how much you compensate your workers and operates in tandem with pay equity. Organizations employ a variety of measures to achieve this goal, including reporting pay data publicly, banning hiring discussions around applicant salary history, and disclosing wage ranges in job listings.
Without pay transparency, “people will always feel they aren’t being paid enough,” according toDiane Domeyer, a managing director at Robert Half.
Companies that embrace pay transparency are expected to have an easier time finding and retaining workers amidthe Great Resignationbrought on by the COVID-19 pandemic.
Navigating the impacts of COVID-19 on the workplace
It’s important to consider how the pandemic plays into the shifting pay equity landscape. To start, COVID-19 has precipitated a sea change in the workplace. The labor shortage puts prospective employees at an advantage when deciding who to work for. Flexibility, remote work options, and good pay are all quickly becoming expectations for people on the job hunt. As increased rates of turnover demonstrate, employees are no longer willing to settle for less.
This trend shows no signs of slowing down in the future. According toJobList, three out of four full-time employees are planning to quit their job this year. What’s more, nearly 80% of employed job seekers believe that they can make more money by switching jobs.
With82% of organizations planning to hire this year, employers must revisit their compensation strategies and policies to meet employees’ needs if they want to keep staff long term. And that means making pay equity a top priority.
The pandemic has heightened the urgency around equal pay, especially when considering the uneven economic impacts it has had on women. As workers return to offices under hybrid models, the gender pay gap is expected to widen – meaning it’s more important now than ever for employers to prioritize pay equity to avoid causing a major setback in efforts to close the wage gap.
“Men are returning to the workforce at a much faster rate than women are,” former Sprint CEO Dan Hesse told Forbes inan interview “…Many companies are allowing people to decide whether to come into the office or not, which I support, but I am concerned that with more home responsibilities, women may disproportionately choose this option, and management and boards need to make sure this does not decrease someone’s promotion potential or we may never achieve gender parity in senior management.”
Some experts believe the changes that came with the pandemic will be permanent.
Melissa Dexter, Chief People Cfficer at Uprise Health,predicted, “The Great Resignation is going to last forever, as it’s a philosophical change in the perception of work as we have known it in our lifetime. It’s not just a period of time. The way in which we work and how people perceive work has changed—there is no going back.”
The data makes a compelling argument: Transparency and inclusive pay practices are critical to cultivating a modern, equitable workforce and one focused on people. Employers that level up and meet the demands of a changing work philosophy – and clearly demonstrate their commitment to closing the wage gap – will reap considerable rewards.
What’s more, they will play a role in recovering and adapting in the aftermath of the biggest global crisis in recent history.
Employers that don’t keep up with the changing times put themselves at legal risk and open the door for negative consequences to their success as an organization.
As society continues to deal with ongoing uncertainty, centering pay equity is one way to bring us closer to a more fair future for all.
If your organization is new to DEI initiatives like pay equity,here are four ways you can put pay equity at the forefront of your compensation strategy.
If you’re interested in learning how pay equity can help you win top talent and retain your current workforce, register to attend our webinar with HR.com, How to Achieve Pay Equity and Win the War on Talent.
Organizations that conduct a pay equity audit must communicate their progress and achievement along the way. To help you faciliate discussions around compensation, we created the Pay Equity Communications Planner.