The Pay Equity Revolution

Pay equity is having more than a moment – consider it a movement. Most people believe defines how companies approach their relationship with their workers. As a result, it radically alters how they foster workplace culture and engagement.

The time to act is now. Firms that wait for the push for pay equity to fade away, do so at their own risk. Equity at work is the number one issue facing HR experts today. The call for action is coming from all sides. They come from workers and job candidates to group leaders and legislators, to society at large. Beyond being a smart decision, it is the right thing to do.

Pay Equity: Traditional Definition

The concept of pay connects to the desire of firms and the workforce for more fairness and equity at work. Pay serves as the quantitative measure of a worker’s value. It also stands for the heart of the deal between workers and employers. As a result, it is a natural focal point when a firm asks, “are we treating our people fairly?”

From the worker’s point of view, they see pay equity through a broader lens. Yes, workers want to know that they are receiving their pay fairly. But now they also want assurances that everyone else receives their pay fairly, too. People want to know that their firm supports fair pay for all.

Modern Pay Equity

Meanwhile, experts at Salary.com are looking at pay equity through a broader lens. Often, most people see this practice as equal pay for equal work. Which, while correct, does not cover all aspects of the pay equity equation. They view pay equity as pay for similar jobs that is internally equitable, externally competitive, and transparently communicated.

Overcoming bias to arrive at fair pay can, at best, feel like a highly charged task. Firms relegate pay equity to the practice of bias testing and reporting for compliance purposes. They tend to limit this practice by the confines of meeting government reporting needs.

Firms should start with the idea that pay equity affects how they approach compensation for all workers. Doing this, they can design a structure that is about the firm as a whole and not solely about compliance.

It is more than a single multivariate regression analysis for figuring out internal equity. Pay equity demands a complete solution. This must reflect what is going on inside and outside of the corporate walls. It should also promote deep discussion on why people receive what they receive.

This holistic view of pay equity dictates that firms secure a leadership mandate that supports a complete pay equity philosophy. This rejects the outdated market-based pay philosophy of today. This, in turn, will lead to a viable approach to pay equity that drives worker engagement and wins the war for talent.

Overcoming Barriers to Pay Equity

HR experts are feeling more pressure than ever to address pay equity. Survey shows that 65% of them agrees with this, and 20% calling the pressure “tremendous.” It also says that the toughest part of pay equity work is getting a mandate and resources from leaders.

Experts need to translate the pay equity process into an action plan. They will present this to C-level execs and a board of directors to secure funding which has been tricky. The reality is there are a lot that firms that do not know about achieving pay equity.

Most firms lack this knowledge of what steps they need to take and the costs. Same goes with the legal effects and what success looks like after the entire process. These unknowns make it difficult for HR pros to rally leaders’ support.

For over 20 years, Salary.com has had advances in the field of compensation. This can help firms design and apply best practices to get the pay right. Along the way, there are hurdles to achieving pay equity that arise during their research. For this reason, they created and defined a best practices framework to guide firms on their journey to achieving pay equity.

They gathered a team of best pay analysts, consultants, and technologists. They do the work of refining and confirming a streamlined, efficient process that takes out any anxiety around the concept of pay equity. The result is the Plunkett Pay Equity Framework^TM that guides firms through the pay equity journey.

Introducing the Plunkett Pay Equity Framework

This pay equity framework sets a continuous pay equity analysis (CPE) method. This covers compensation management, with a six-step benchmarking and worker communication process.

Here is what a CPE analysis looks like:

1. Mandate pay equity
2. Group comparable jobs
3. Model internal equity
4. Benchmark external competitiveness
5. Communicate transparently
6. Update continuously

Experts believe that over 10% of US firms will adopt a pay equity approach. This covers to managing compensation, changing the common, but less comprehensive, market pricing approach they use today.  For those firms that need outside help, there are countless consultancies that can help, as well as law firms that focus on this area.

As for the question “can we afford it?” Experts believe it would be sufficient for most firms. This includes those with some discipline around pay structures to budget a 20% increase to their normal annual budget for raises to close any gaps. Firms can spread the cost over a three-year period while they work on closing gaps.

The Rewards of Achieving Pay Equity

During the height of the pandemic and its aftermath, the number of connection points a worker has with their firm radically changed. Many are working from home. For those that go into a workplace, they are often facing more stressful in-person settings. This dynamic has elevated the status of pay and equity to new heights. This now serves as a key connector between a worker and the company.

Like no other time in history, pay and equity are key drivers of culture and engagement. Beliefs about fair pay and equity are changing rewards. This can be bringing pets to work or cold brew on tap in the diner that drives worker engagement.

The workplace setting is ripe for radical change with the current transfer of power from employer to workers. This covers how firms analyze pay equity and manage workers’ pay analysis. Also, creating fairer worker experience will be the most vital plan for HR execs in the future.

To point out, the firms that adopt a pay equity framework for managing compensation will be the most progressive in the country. Their leaders will define how firms put workers first.