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Communicating About Fair Pay Remains a Tough Nut to Crack

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The topic of fair pay has been in headline after headline recently, and a disconnect between what managers and organizations believe about how pay is communicated is adding to an already complicated issue.

One-third of the 7,100 employers (37%) who responded to PayScale’s “2018 Compensation Best Practices Report” (CBPR) said they have confidence in their managers’ ability to explain pay decisions. Yet, 85% of managers either said they “agree” or “strongly agree” that they feel confident in their ability to explain the rationale behind pay decisions to employees. Other research from PayScale found that effective conversations with employees about pay can build trust as well as increase retention and drive deeper engagement throughout the organization.

“More and more, employers are realizing that when employees feel good about their deal, it has a positive impact on the bottom line,” said Tim Low, senior vice president of marketing at PayScale.

As a result, he said, conversations about pay are crucial because they provide an opportunity for employers to build trusting relationships and show employees how valued they are to the organization.

“Yet, many managers are unable to fully articulate how pay was determined, leaving employees feeling disconnected and dissatisfied with their employers,” Low said, adding that in this case, it seems managers are in the dark.

For example, the survey found that 67% of managers believe their employees are paid fairly. Employees don’t feel the same way, though, as only 21% of them said they believe they are fairly paid.

Other highlights:

  • Retention remains a major concern, but wages still won’t see meaningful increases. Nearly 60% of organizations reported being very concerned about employee retention heading into 2018, a bit more than in 2017. However, 73% of employers estimated that the average raise in 2018 won’t differ much from 2017, holding steady at 3% or less.
  • Bonuses are getting traction. Because wages didn’t experience significant growth in 2017, employers relied on specific bonuses to attract and retain hard-to-find employees in competitive fields, such as technology. Specifically, organizations offering individual incentive bonuses increased from 64% to 67% last year, and hiring bonuses were on the rise: 34% in 2017 compared to 27% in 2016.
  • Employers are increasingly concerned about workplace inequities, but more can be done. Top-performing organizations were more concerned about fairness than typical organizations, as more of these employers reported actively addressing workplace gender inequities in 2017 (35% vs. 26%) and race-ethnicity inequities (28% vs. 23%). With that, 63% of top-performing companies still have no plans to conduct a gender or race/ethnicity pay equity analysis in 2018.

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