Written by Garry Straker
March 2, 2022
Pay equity is shaping up to be the defining compensation issue of 2022 – and for the foreseeable future. As HR pros evaluate how their organizations are, or will be, approaching pay equity, the Salary.com team sought the views of both employers and employees on this pivotal topic. The results of our surveys, conducted in October-December of 2021, depict a strong desire from both sides to address it, while revealing obstacles that are preventing some organizations from achieving it.
The push for pay equity
Pressure is clearly mounting for HR pros to address pay equity at their companies. 64% reported facing more pressure than just six months ago, with a significant number of those respondents calling the pressure "tremendous."
Where is the pressure coming from? HR pros said current employees and job candidates were the top sources of pressure to get pay right, followed by organization leadership and society at large. Given the employee push, it’s understandable that 95% of HR pros see pay equity as a competitive advantage in the war for talent, yet more than a third said their organization is struggling to address pay equity.
Employees, meanwhile, made it clear that compensation matters: it ranked as their top consideration when evaluating a company for employment. Yet they are evenly divided on whether or not they believe they are paid fairly and equitable: 40% believe they are, 40% do not believe they are.
Almost half (46%) of employees don’t think they are paid fairly compared to people in the same role at other companies and over a third (37%) don’t think they are paid fairly compared to their internal colleagues.
These unfavorable employee perceptions of their pay may be part of what’s fueling the Great Resignation/Great Rehire. If employees believe they can be more fairly compensated elsewhere, they are more inclined than ever to move on.
A lack of pay transparency
Our surveys brought into sharp focus a major obstacle to pay equity: a lack of pay transparency.
If pay represents the foundation of a contract between an employee and an employer, it stands to reason that an employee could get a satisfactory answer when they ask their manager “How is my pay determined?” Yet only 34% of HR pros said that any manager at their company could accurately and honestly answer that question.
At the heart of the problem: only 35% of companies surveyed have established a pay philosophy that supports pay transparency. For some it begins in the recruitment process. Almost an equal number currently provide wage range disclosures in job postings. More employers indicate they plan to do so in 2022.
Our research shows taboos persist when it comes to talking about pay:
Of the 50% that have asked:
Such real or perceived barriers around pay transparency are detrimental to achieving a healthy corporate culture, particularly when you consider the high percentages of employees who believe they are not paid fairly. Despite 61% of companies having a process in place to address internal pay equity.
There is some distrust among employees that their employers are administering pay in a way that is consistent with their organization’s stated values. 43% of employees do not believe that pay practices are consistent with those stated values.
By creating a more open dialogue around how a company’s pay philosophies and salary structure is determined can reduce friction between employees and employer and potentially prevent employees from feeling undervalued.
Defining pay equity
Salary.com has defined equitable pay as being internally equitable, externally competitive, and transparent to employees, and 92% of HR pros agreed. Employees we surveyed supported this, with 73% stating it’s equally important for them to know they are paid fairly in comparison to their colleagues at their own company and to people in similar roles at other companies.
When asked what considerations employers should take into account when determining fair and equitable pay, employees said:
Pay equity building blocks
It’s important to note the progress being made on the path to pay equity.
61% have a process in place to address internal pay equity and 23% will begin putting that process in place within six months.
Half of companies have allocated resources to address identified pay disparities in their organization and 23% will be doing so in the near future.
While this forward progress and attention to the issue is promising, 35% of HR pros indicated that getting leadership buy-in was their biggest challenge.
The realities of a stubbornly tight labor market and an emboldened workforce might help HR teams convince their organizational leadership that supporting pay equity is not only the right thing to do, but it may also be their best way to maintain an engaged and loyal employee base dedicated to advancing the business.
To download the full employer survey results click here.
To download the full employee survey results click here.
Download our white paper to further understand how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.