Pay Transparency, Pay Equity, Pay Gaps, and What to Do About Them
Compensation is a crucial factor in your talent acquisition, employee engagement, and employee retention strategies. Eighty-one percent of workers feel more productive and engaged when they perceive that they’re paid fairly, and 75% of workers are more likely to apply for a job within a company that’s known for transparency.
To optimize your compensation strategy, it’s important to understand some key terms and how to address them.
Pay transparency is the practice of openly sharing information about compensation structures. The goal is to increase fairness and trust and for candidates and employees to know your policies, structure, and rates.
Pay equity is the principle of ensuring that employees are compensated for equally performing work. In other words, employees doing the same job should have the same pay ranges, regardless of gender, race, ethnicity, or other personal characteristics.
Pay gaps are differences in average earnings between different groups of employees. This may relate to gender, race, ethnicity, or other personal characteristics and can reflect disparities in compensation for doing similar roles, similar responsibilities, or similar work.
Your compensation philosophy is a formal written statement highlighting your organization’s compensation program and reward strategies, including things like how employees get merit increases and what your starting ranges are. This provides reasons behind your compensation decisions.
Compensable factors are specific elements used to determine the value of the job and the corresponding pay for that job within your organization. These may include skill sets, effort, working conditions, performance, or level of responsibility.
How to identify pay gaps
- Gather data. Dig deep to track compensation not just based on the job title, but on gender, race, education, experience, performance, etc.
- Analyze the data. Look at different factors to see where or why the inequities might exist. This is often not because of malicious intent, but happens over time as new employees join the organization, gain experience, etc.
- Find discrepancies. For example, if you have two recruiters and they’re being paid differently, is there a reason? If not, that’s a discrepancy.
Working toward equity
Pay equity isn’t going to happen overnight, but you can create a foundation for it. Find areas of opportunity, create a strategy, establish a measurement system, and create a plan for continuously monitoring your baseline and ranges. Critically analyze decisions to understand how and why pay gaps are happening, then look at your budget and scale for your adjustments.
Communicate your plans to your employees. You may not be perfect, but it’s important for them to know that pay equity is a priority for you, you’re evaluating it in a continual process, and you have systems and processes for identifying and addressing inconsistencies.
By practicing pay transparency, identifying pay gaps, and prioritizing pay equity, you’re taking steps toward a healthier work environment with engaged and high-performing employees. That’s a win for you AND your employees!
It’s important that you pay your people fairly, equitably, and competitively. Compensation impacts every aspect of your talent strategy, from attracting new talent to retaining the high performers you already have on your team. Purple Ink can assist you with your compensation strategy in a variety of areas. We subscribe to employer-reported databases, giving us access to more detailed and accurate data than you’ll find searching the internet yourself. We’d love to chat about how we might create a unique solution customized for you.