Achieving Internal Pay Equity: A Crucial Step in Business

Internal pay equity has been a hot topic for many years. This movement is gaining momentum as more employees demand better working conditions. As HRMorning put it, “There’s no getting around it: 2023 is the year of the worker, and workers want pay equity and pay transparency.” Salary.com defines pay equity as equal pay for comparable jobs that is internally equitable, externally competitive, and transparently communicated – and the company is committed to achieving it.

Successful companies know that success starts with your people. Unfortunately, the ongoing skills shortage and shift in employee mentality could be affecting your organization as it is many others. When your goal is to hire top talent, achieving internal pay equity must be a priority. This crucial business tactic is pivotal in work culture, company reputation, employee productivity, and even legal responsibility. Read on to learn why!

Attracting and Retaining Top Talent

A Josh Bersin study asked employees what they value most in the workplace. Surprisingly, above-average compensation was not at the top of their priorities – not even close. What did rank in the top five was fair and equitable rewards. Employees expect their companies to commit to internal pay equity.

Your commitment to pay equity and pay transparency matters for attracting and retaining top talent. Turn a blind eye and you may be saying goodbye to existing and potential top talent. With how competitive today’s job market has become, can you afford that?

Fostering Positive Work Culture

Most employees spend a third of their lives at work. When they are unhappy, this translates into their personal lives and makes life much harder. Creating a place where employees can spend those nine hours of their day surrounded by positivity is in their favor, and yours. One of the most effective ways to do so is through internal pay equity.

When employees know that their organization is committed to creating a fair workplace, trust grows. They come to work relaxed and satisfied. Managers and employees respect one another. They share a vision aligned with company objectives. Fostering a positive work culture through internal pay equity empowers everyone and certainly attracts top talent.

Increasing Employee Productivity & Motivation

Increased productivity and motivation come from a positive work culture. It is so much easier to be productive and motivated when you enjoy your workplace. What’s more, working alongside top talent you attracted with your internal pay equity efforts boosts overall morale.

Importantly, when you value paying all your employees equitably, you demonstrate respect. Respected and fairly compensated employees are more driven to produce results. They become invested in the company. This makes them passionate about aligning their objectives and seeing the company succeed.

Enhancing Company Reputation

Company reputation is important for several reasons. It impacts your customer base and loyalty. It naturally attracts top talent who become interested in your mission. It even creates free marketing as fans of your brand spread the word. Your attitude about internal pay equity is critical to remain competitive today.

Importantly, a good company reputation for having internal pay equity impacts the bottom line. A McKinsey study found that Gen Z consumers will boycott unethical companies. The majority are happy to pay more for products that reflect their values. JUST Capital even found that companies focused on fair compensation produce higher net margins.

Mitigating Legal Risks

When it comes to internal pay equity, you must not overlook your legal responsibility. The US has federal and state laws making pay equity a legal obligation. Newer legislation demands pay transparency and protecting employee salary histories as well. Failure to comply can put a company in hot water. The consequences include fines, penalties, and damage to your organization’s reputation.

The US Equal Employment Opportunity Commission offers detailed information about these laws. The US Department of Labor provides information on state-by-state legislation as well.

Everyone Deserves Internal Pay Equity

First and foremost, internal pay equity is your social responsibility. This battle has gone on long enough – people need to be paid fairly. Protected classes and biased assumptions have no place in the workplace. Comparable work deserves equal pay.

What’s more, studies show that companies that excel in internal pay equity report higher profitability. They have improved customer satisfaction and rates of attracting and retaining top talent. If nothing else, it’s a legal requirement.

Regardless of your motive, you’d be a fool to overlook internal pay equity in your business strategy. This is a crucial step for success.