How Does Pay Equity Impact Employee Productivity?

Pay equity is becoming integral to the success of businesses today. It is at the forefront of workforce conversations and plays a major role in attracting and retaining top talent. It’s arguable that it’s no longer optional for employers. In fact, more state and federal laws are being passed around equal pay for equal work.

While compliance is important, pay equity is in fact a clever business tactic. A Josh Bersin study found that organizations that prioritize pay equity are 1.6 times more likely to meet or exceed financial targets and satisfy customers. Why? Because their employees feel more appreciated. Environments that promote inclusivity, diversity, and equity (DEI) foster engagement and increase productivity.

How Covid-19 Shifted Pay Equity Expectations

The pandemic disrupted all our lives. Life was put on pause, many lost their jobs while the workforce structure of those who remained employed transformed, and a newfound appreciation for work-life balance sprouted. Now, employees not only expect good salaries, but they won’t even consider jobs that don’t offer flexibility and remote work options. We’re also caring a lot more about equity.

A major concern that has emerged post-Covid is the gender gap in the workforce. The pandemic had disproportionate impacts on women.

Dan Hesse, former Sprint CEO explains further, “Men are returning to the workforce at a much faster rate than women are. 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.”

The time is now to revisit your pay strategies and philosophy. Avoiding this will increase the likelihood of employee turnover and you could find yourself saying goodbye to your best talent. It may also result in unconscious decision-making that widens the gaps. Pay equity should be at the top of your priorities.

Why Pay Transparency Goes Hand in Hand with Productivity

How would you feel working for a company that keeps compensation discussions on the hush? Would you dedicate yourself 100% to a role without knowing how your pay is decided? What if you found out that your colleague doing comparable work was earning more than you? Pay equity is often coupled with pay transparency. It can seem daunting, but it is for the better good of your company.

One study in the US looked at how pay equity affected the productivity of African-American employees in business schools. It found that conveying messages about pay equity influenced their productivity and organizational commitment. “Highly productive participants who perceived pay equity reported the highest commitment. When pay was seen as inequitable, the most productive scholars reported the lowest commitment.” This is particularly important when considering groups that are more susceptible to pay discrimination.

Pay transparency cultivates a modern, appealing workplace. Employers who are willing to do their part and meet the pay equity demands we’re seeing will prosper.

Transparent Pay Equity

Start by disclosing a specific salary or pay range when listing a job vacancy. A recent Adobe study found that “85% of upcoming and recent grads say they’re less likely to apply for a job if the company does not disclose the salary range in the job posting.” This helps to eliminate bias when making salary offers.

It’s then important to decide how you’ll approach transparency with your team. This varies from company to company. You could disclose pay ranges for every position, the exact salaries of all employees, or keep it department-related. Regardless of how you do it, when your employees know why they’re paid how they are, they can move past questioning whether it’s fair and get on with their work.

Pay Equity Opens Doors

The employees often affected by pay inequity are people of color, women, and other minority groups. But many aren’t putting up with this anymore, and it’s employers who are at a loss.

In fact, First Year Capital conducted a survey and found that companies led by females performed 63% better than all-male teams. A Boston Consulting Group study showed women outperforming their male counterparts despite less funding. Another study showed that diversity increased innovation by 12.9%. If you don’t practice pay equity, you will be missing out on these advantages.

Turn your workforce into one that prioritizes DEI. Create equal opportunities for everyone. Ensure that your pay practices have no gaps and that you could confidently explain them to your team. Remove compensation concerns and leave room for productivity and innovation. Facilitate a workplace built on trust and satisfaction.

The Way Forward

When you value pay equity, you allow your organization to grow. Your workers feel more satisfied with their place in your company and focus more on producing quality work. It opens doors for more diversity and encourages growth in the company. When an environment boasts cultural diversity, varying backgrounds, and teams of mixed experience levels, it inspires creativity.

Are you more likely to work hard and strive for 110% when your compensation is taboo, or when you understand it? I know my answer.