Most companies are still failing to achieve pay equity, a new study has revealed.
Just 14% of organisations dedicate sufficient budget to effectively tackle pay equity issues, according to the pay equity study from Josh Bersin Company. Despite a strong commitment among employers to address pay inequality, there is also a significant gap in execution. Around seven out of 10 CHROs and the C-suite see pay equity as a critical component of their people and business strategies.
Its latest The Definitive Guide to Pay Equity: Increasing Productivity, Innovation, and Sustainability, a comprehensive report to help CHROs and the wider C-suite understand and address the issue of pay equity, comes at a time when pay equity has never mattered more.
PAY EQUITY
A key finding from the report, carried out this month to coincide with Equal Pay Day, is that pay equity as a driver of good employee experience, innovation, and overall business performance is more than the aggregate level of pay. On a list of 84 employee experience strategies, ranked by their impact on outcomes, fair and equitable rewards were number 5, while above-average compensation and benefits ranked much lower, at number 75.
The pay equity study examined 448 companies internationally. In addition to the top findings, the study uncovered other important insights, including:
- 95% of companies are failing to achieve the highest level of pay equity maturity. They either overlook the issue of pay equity until a legal, compliance, or reputational risk arises, or they engage in sporadic projects that address pay equity in a piecemeal fashion. This results in issues recurring repeatedly.
- Meanwhile, the 5% of companies that excel in pay equity are reaping significant benefits, including higher profitability, improved customer satisfaction, and success in attracting and retaining top talent.
- Fueling this challenge, only 21% of companies listen to employee feedback on pay equity and only 15% are willing to communicate the required to address the pay equity issue.
- New technologies to help spot pay inequities are still not well adopted. Only 14% of companies in our studies are actively using data and equity platforms to pinpoint problems.
STRIVING TOWARDS PAY EQUITY
The US has been striving towards pay equity for over fifty years. In 1963, John F Kennedy passed the first Equal Pay Act, banning overt policies and practices that paid women and men differently for equal work. Additional Federal legislation expanded the focus beyond gender to encompass race, national origin, and other protected classes, and all 50 states have passed or enhanced their own.
In recent years, massive lawsuits like Google’s $118m settlement and ever-increasing legal pressures have brought the issue of pay equity to the forefront of CEO agendas.
“While most companies know they must increase pay during times of inflation, they do not understand the problems they create when people feel the system is unfair. Most employees know that they are paid for performance, but when they perceive unfair practices (due to bias, racism, sexism, or simple politics) they lose confidence in the company and their sense of trust is damaged. The result is more politics, turnover and low levels of engagement,” stated Josh Bersin, global industry analyst and CEO of The Josh Bersin Company.
UNDERSTANDING WHAT EQUITY REALLY MEANS
The problem goes beyond bias, however. “Companies have to discuss what “equity” really means, and what criteria will be used for bonuses, rewards, and raises. Our new Definitive Guide builds on the experiences of world-class companies and helps teach HR teams and CFOs how to address this issue,” added Bersin.
Considering that pay equity has been on the agenda for around 50 years, “it’s shocking that as many as 95% of companies are not accomplishing the highest level of pay equity maturity”, commented Kathi Enderes, Senior Vice President, Research and Global Industry Analyst at The Josh Bersin Company. “Half of the companies are only addressing pay equity to mitigate legal issues, while 37% view pay equity work as a sporadic process conducted once a year. Now, though, pay equity trailblazers like Patagonia, Microsoft, and Adidas are realising that performance-related pay is not the ultimate goal. They understand that pay equity is not only about fair and equitable pay and bonuses, but also a means of running a company equitably. Done right, every decision in the organisation must be explored through an equity lens.”
For more information about The Definitive Guide to Pay Equity click here.
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