How to Integrate Pay Equity into Performance Management

You most likely conduct some kind of performance management in your organization. You also hopefully address pay equity and fair pay practices. But why not combine them and hit two birds with one stone?

Pay equity is a hot topic. There is a growing compliance obligation as state and federal laws emphasize its importance. Additionally, employees are demanding fairer pay practices and transparency at work. However, according to Salary.com’s Pay Equity Pulse Survey, 41% of companies are struggling to address pay equity.

Are you one of these? Consider integrating pay equity into your performance management.

Overview of Pay Equity and Performance Management

How you conduct performance management sets the tone for how you run your organization. When conducting performance reviews, it’s important to acknowledge the good and discuss the bad. Performance reviews are the time to ensure your team is on track, listen to feedback, and offer guidance. Many managers use the time to incentivize admirable performance.

It isn’t uncommon to combine pay and performance. In fact, 75% of the companies surveyed by Salary.com said they leverage pay-for-performance plans. They incentivize and reward employees for achieving goals or objectives. Understandably, your top talent is unlikely to stick around if their hard work isn’t being acknowledged.

Getting pay right is essential for any strategic approach to hiring and retaining staff. As the labor shortage continues to affect many industries, workers are demanding better compensation packages. Compensation includes base pay, benefits, insurance, commission, and flexibility. What more people really want to see is pay transparency and equity.

The Impact of Pay Equity on Employee Performance

Pay equity isn’t just in the best interest of employees. Employers can benefit in a number of ways. It’s a no-brainer that the more satisfied an employee is in a job, the better their performance. When employees feel like they’re paid what they deserve, with equal treatment to their counterparts, they are more likely to be satisfied.

Pay equity also promotes a healthier performance management process. If everyone’s on the same page about what they’re paid and why, there’s less room for bias and favoritism. Your employees know they’re not subjectively judged for characteristics that are out of their control. They can then focus more on meeting performance expectations and company goals.

As any employer knows, turnover is expensive. Replacing skilled, trained employees isn’t easy and rarely is it quick. If you can achieve pay equity in your workplace, you’re more likely to increase retention rates. Employees who feel like they’re fairly compensated and truly valued are more likely to stay dedicated to your company.

Steps to Integrating Pay Equity Into Performance Management

Establish Your Goal

If you want to integrate pay equity into your performance management, start by establishing your goal. It’s vital to be clear on why exactly your organization is practicing pay equity. Are you just being compliant or do you want to become a more diverse, inclusive, and fair workplace?

Train Your Managers

Then you need to train your managers accordingly. Everyone should be on the same page and follow the same clear framework. Annual performance reviews won’t cut it. Regular feedback ensures your employees are always on the right track, or at least not far off it. This approach means they’re receiving mentorship rather than criticism. It also means employees can put forward their queries or feedback as they arise.

Practice Transparency

When addressing compensation, the key is to be transparent. Provide insight into pay grades and show your employees where they fall within your pay structure. Be clear on how they can progress and earn more. Ensure you consider any factors that could create disadvantages so you’re certain everyone has equal opportunities. Remember that equality is not equity.

Update Job Descriptions

As you make the rounds, update your job descriptions to accurately represent the responsibilities each role is performing. This will allow you to identify gaps you may have unintentionally created in your pay practices and then address them before they become real issues. For any employees with doubts, these check-ins will reassure them that your pay practices are fair and equitable.

Final Comments

Pay equity can make a world of difference. Integrating it into your performance management is a strategic approach that aligns employee interests with company goals. Conversations around pay don’t have to be awkward and problematic. While taking the morally right route, you’re also staying compliant and improving retention rates.

When you can transparently discuss pay grades and how you make pay decisions, your employees will have clear paths to success. They understand how compensation is decided and what rewards to expect, rather than waiting years for a promotion. It ensures you can keep them on track and offer the same opportunities for everyone. Open lines of communication develop trust in the workplace.

Ultimately, facilitating an environment that motivates employees to be more productive and engaged is a crucial component of performance management.