WCI, Inc
Oct. 27, 2021

The case for pay equity reviews

While pay disparities persist in the American workforce, SHRM (the Society for Human Resource Management) released new research that shows nearly three in five (58 percent) organizations voluntarily conduct pay equity reviews to identify possible pay differences between employees performing similar work. Of those organizations, 83 percent adjusted employees' pay following a pay equity review, according to SHRM surveys of HR professionals and American workers. The survey results demonstrate that focusing on how employees are compensated has numerous benefits for employers, especially when it comes to strengthening workplace culture.

For example, 91 percent of employees who believe their organization is transparent about how pay decisions are made also said they trust that their organization pays people equally for equal work regardless of gender, race and ethnicity.

Conversely, only 49 percent of those who believe their organization lacks transparency when it comes to pay decisions trust that employees are being paid equally for equal work. SHRM also found less than half (47 percent) of HR professionals said their organization is transparent with employees about how pay decisions are made, but 94 percent think it is important for organizations to do so.

"This research shows that workplace culture starts at the top—and organizations with forward thinking leadership are in the best position to win the global competition for talent," said Emily M. Dickens, SHRM chief of staff, head of government affairs and corporate secretary.

Key findings from SHRM's research include:

  • Of HR professionals who said their organization doesn't conduct pay equity reviews, nearly half (47 percent) said it's because conducting pay equity reviews is not a priority for their senior leadership.
  • Only 35 percent of organizations that conduct pay equity reviews also provide training on how to properly document pay decisions. That number decreases to 12 percent for organizations that don't conduct pay equity reviews.
  • Women are more likely than men to say they asked for only one to 10 percent more than their current pay (50 percent versus 34 percent) during the job interview process, whereas men were more likely than women to say they asked for 11 percent or more (34 percent versus 20 percent).
  • Around one in four workers found out someone of a different gender (23 percent) or race or ethnicity (19 percent) at their organization was paid more than they were even though they performed the same job and had the same experience.
  • Of workers who have found out someone of a different gender or race at their organization was paid more than they were, more than two in five (42 percent) said they found out through workplace gossip.
  • About one in five (19 percent) workers who found out they were being paid less than a colleague of a different gender or race said they talked to other employees about the pay difference and more than one in four (27 percent) started looking for a new job.
  • Ninety-one percent of the organizations surveyed said they voluntarily offer higher starting pay to candidates who possess skills, qualifications or credentials above and beyond the minimum qualifications, but 20 percent of those organizations don't have a formal way of tracking information about those factors.
  • Organizations with 5,000-plus employees (78 percent) are significantly more likely to conduct pay equity reviews than organizations with fewer than 100 employees (48 percent).
  • Organizations with a female owner or CEO are more likely than those with a male owner or CEO to conduct pay equity reviews or audits (67 percent versus 55 percent).

"These findings demonstrate the path toward equity requires more directed education on the compensation process and increased engagement with people on the front lines of designing and implementing pay strategies—HR professionals," said Dickens. "At the same time, organizations should help build a deeper understanding of pay equity best practices among people managers."

Source: Society for Human Resource Management.

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