How Does Pay Equity Impact Employee Morale?

If two employees have similar roles and perform similar responsibilities in an organization, they should be paid the same amount, right? Imagine what the repercussions would be if one of those employees was paid less than the other person, despite there being no real reason for this difference. How would that impact their morale?

In this article, we will set out to answer this question and find out the impact that pay equity has on employee morale. It’s important to realize how pay equity affects everyone in your organization, as employees often want what’s best for them, as well as their colleagues. By understanding the topic more deeply, employers can empower their employees and make a positive change in their organization today.

What is Pay Equity?

Pay equity is about ensuring that there is equal pay for equal work within your organization, regardless of age, gender, ethnicity, or other personal attributes. Pay equity has many layers which makes it hard to define. At Salary.com, we define pay equity as equal pay for comparable jobs that is internally equitable, externally competitive, and transparently communicated.

Pay equity isn’t just concerned with employee morale, however, as aspects such as employee productivity, market competitiveness, legal compliance, and more are also vital to organizations. Making pay fair and equitable can be a solution for organizations when it comes to driving growth. In this article, we will primarily focus on employee morale, but for the full range of benefits that pay equity offers organizations, check out our other article on the topic.

Benefits of Pay Equity for Employee Morale

Achieving pay equity allows organizations to stay competitive and attract top talent, while also having a positive boost on employee morale. When everyone within an organization receives fair pay based on the value they bring to their job, it builds a supportive workplace where employees have trust in their employer. Here are several benefits of pay equity that directly impact employee morale:

When organizations have pay inequality, it can lead to animosity between employees and stimulate competition, rather than collaboration. There is no favoritism or bias when everyone is paid fairly for their work. This leads to better cooperation between employees, which can lead to higher morale levels in a team.

When employees feel like they’re being properly rewarded, they tend to perform better overall. An improvement in individual performance can help have a positive effect on team performance. This contributes to an improvement of morale in an organization, as well as a boost in the organization’s output.

A lack of pay equity can have damaging consequences on employee motivation. When employees know that compensation is based on skills, performance, and experience, they will be more satisfied. This increase in satisfaction naturally leads to higher employee morale which can help motivate employees to put effort into their jobs.

How Pay Inequity Damages Employee Morale

Now that we’ve seen how pay equity can benefit your employee morale, let’s dive into how pay inequity damages your employee morale. Failing to achieve pay equity can leave your employees demotivated and dissatisfied. Here are several ways that pay inequity damages employee morale:

When an organization doesn’t pay fairly, employees can lose trust in their employers. If there’s a lack of trust, it can lead to employees not being on the same page as their employer and not caring as much about reaching goals. As this is the case, it’s safe to say that a reduction in trust leads to low employee morale.

A lack of trust can be exacerbated by a lack of transparency within an organization. If organizations fail to disclose how pay equity plays a part in their organization and what factors influence pay, employees will feel that information is being hidden from them. Employees may feel disassociated from their organization, which can contribute to lower morale levels.

If pay inequity runs rife throughout an organization, it should be unsurprising that employees may seek opportunities elsewhere. Low morale gives employees more reason to leave in the hope of finding a job that offers them more satisfaction. This can be very costly to an employer, especially when it comes to the recruitment costs needed to find replacements.

This is Just the Tip of the Iceberg

Pay equity has so many layers to uncover and its effect on employee morale is one of them. We have plenty more articles on pay equity for you to explore here. If you’re still craving more information, you can search for pay equity blogs on the Salary.com website.