An increasing number of organisations are acting on pay equity, new research has revealed.
WorldatWork’s “Pay Equity Study” found that 70% of organisations took action on pay equity in 2022; a 10% increase since 2019 and a 4% increase over 2021. Only 2% of organisations reported not having pay equity on their radar. Three-quarters of organisations had been doing pay equity analysis for three years or more compared to two-thirds in 2021.
Organisations taking action on pay equity cite “it’s the right thing to do, to build/maintain a culture of trust and to remove bias against protected classes” as the main reason for doing so. However, potential cost to fix pay inequities is cited as one of the largest barriers for companies that have pay equity on their radar and have not yet acted.
“Increasingly employees want more transparency on how they are being paid and why,” said Sue Holloway, Compensation Content Director at WorldatWork. “With more pay transparency legislation being implemented, pay equity has garnered more attention from organisations.”
PAY INEQUITY & TRANSPARENCY
Organisations are increasingly concerned about the legal risk of pay inequity. Since 2020 the proportion citing “mitigating legal risk” as very or extremely influential to their organization’s choice to pursue pay equity has increased by 20% to 71%. While organisations have begun to include more types of compensation in their pay equity analyses, most could improve their pay equity analysis by being more inclusive of all types of pay, revealed the study.
“If companies conduct an analysis only on base pay, they could be leaving out important elements of total compensation. Including bonus payouts, equity grants, and other kinds of compensation results in a more holistic analysis.” stated Emily Cervino, Head of Fidelity Stock Plan Services Industry Relationships and Thought Leadership.
KEY FINDINGS
Key findings amongst organisations that have a pay equity process in place, revealed that:
- Nearly all include base pay in their analysis or are thinking of including it in the next year.
- More than half include or hope to soon include short-term incentive plan payments (eg, annual bonuses, profit sharing), and sales commissions/incentive payment.
- Nearly half include or anticipate including long-term incentive plan equity/stock-based grants.
- Even the least-frequently included types of compensation, such as special one-time equity/stock-based grants are (or likely will soon be) included in pay equity analysis by more than a quarter of respondents.
When it comes to communicating about pay equity, just over one in 10 share the high-level results of pay equity analysis publicly. Around a quarter share the high-level results with their employees, but only a third even share the fact that they are doing a pay equity analysis with their employees.
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