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Businesses Are Acting on Pay Equity

As pay equity becomes more of a pressing social and political issue, businesses are considering their options.

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An overwhelming majority of respondents to the recent “Pay Equity Management Practices: A Survey of C-Suite and Rewards Leaders” by WorldatWork and Korn Ferry are either taking, or planning to take, action on pay equity. 60% of the 335 respondents report taking action on pay equity while 33% have targeted the issue for future action.

“Pay equity is one of the most complex, multifaceted, sensitive and visible people issues facing organizations today,” wrote Tom McMullen, the Global Rewards and Benefits thought leadership and intellectual capital leader for Korn Ferry, in an upcoming WorldatWork Journal article. “Understanding how to approach, diagnose and address pay equity concerns has never been more important. Today’s business, regulatory, political and social climates are converging to place unprecedented levels of scrutiny on what organizations are doing — or not doing — to ensure they are fostering an inclusive environment in which all employees have equal opportunity to thrive, develop and be rewarded. This is an issue of equal opportunities for access to employment opportunities and equal opportunities for compensation once employment opportunities are realized.”

Among the major findings in the survey:

  • The primary objectives of pay equity management are to be legally compliant, especially from the perspectives of human resources and larger organizations, and to build a culture of trust within the organization.
  • Most organizations engaged in pay equity management are primarily focused on remediation strategies and pay equity adjustments as well as identifying and resolving root causes of pay inequities.
  • Perceptions vary between the C-Suite and HR as to who is actually driving the work. The C-suite tends to drive initiatives in smaller companies while HR drives them in larger companies. This has significant implications as to the scope, nature and impact of the work.
  • Most organizations take an inclusive view of eligibility for pay equity adjustments, allowing any employee (irrespective of protected class) to be eligible. The C-suite favors this view while rewards leaders tend to favor treating only members of the protected class.
  • Organizations typically find that less than 5% of their workforce need equity adjustments. When grouped by size, smaller organizations treat from 2% to 5% of the workforce and larger organizations treat 0.1% to 1%.
  • Pay equity adjustments typically range from 4% to 6% for those receiving increases.
  • Most organizations broadly communicate the intent and general findings of the pay equity analysis to senior leaders, followed by people managers.
  • Once the initiative has been chartered, HR tends to be the process owner. The legal function, while not owning the process, is often an integral part of the team.
    • A minority of organizations provide broad-based communications to employees. Most organizations avoid explicitly noting internal equity adjustments as such and instead bundle it with other pay increases (e.g., market, performance). This is likely due to increase processes becoming part of normal cadence of compensation management and risk mitigation strategy.

Organizations will be well served to consider refining their reward strategy to directly address internal equity pay management principles, McMullen wrote, providing these examples:

  • We consider pay equity a key tenet of our rewards strategy.
  • We examine pay equity on an ongoing basis.
  • We review pay equity by a number of key employee characteristics.
  • We provide pay equity adjustments as needed.

“Organizations that proactively focus on addressing pay equity management will not only be compliant with a new regulatory environment and reduce their risk of litigation, they will benefit by increasing the trust and engagement levels of their employees and better position their organizations as an employer of choice,” McMullen concluded.

The WorldatWork-Korn Ferry survey was in the field in January. Results were released in May.

About the Author

Jim Fickess is a writer/editor for WorldatWork.

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