There is an assumption that pay policies treat all employees fairly and equitably. However, in reality, everyday pay practices – as in how your policies come to life – are impacted by systemic and structural issues that allow biases to perpetuate in the workplace and lead to differences in opportunities and inequitable treatment.
Pay equity is now a political, social and economic issue and employers are increasingly committing to tackle pay equity and equality by doing a full equal pay audit. However, a complete pay equity audit can take time, so if you want to do a quick health check, here are five practices you might consider that will help ensure your pay policies are treating employees equally.
1. Do you disclose pay ranges during recruitment?
The recent adoption of the Pay Transparency Directive by the European Parliament represents an important step towards reducing the gender pay gap through increased transparency in pay.
The directive will require employers to disclose salary ranges during recruitment in an aim to increase pay transparency and reduce pay gaps. Although the UK is no longer a member of the EU we might expect UK legislators to also consider compliance with the directive in time.
The talent acquisition process is a key touchpoint in the employee lifecycle. It’s the point at which an employee’s salary history with your company begins and can set the wage bar for the rest of a career, perpetuating any initial inequity.
Advertising roles with pay range data is a more transparent approach and can eliminate unnecessary negotiation (where men tend to fare better than women). It can also ensure offers are based on qualifications and where a candidate sits in a range based on legitimate factors that should drive pay variance (like relevant qualifications, years of experience and geography).
2. Do you disclose candidates’ pay during internal promotions?
Growing salary history bans (that, for example, now exist in over 19 US States) mean it’s no longer OK to ask for prior salary information from new hires. This is also included in the EU Pay transparency directive. The aim of this legislation and practice is to tackle gender pay gaps by ensuring that low pay doesn’t follow women from job to job.
But the same principals can be applied to internal promotions or job moves and many leading employers are extending this practice and not disclosing internal candidates’ pay during selection processes. Again, this means rather than simply up-ticking salary on promotion by a small percentage, you give candidates the correct and fair rate for the job and avoid compounding any existing inequity.
3. Do you track ad hoc pay adjustments throughout the year?
Many organisations do not track the cost of ad hoc adjustments awarded to employees which can not only lead to unexpected costs, but also drive pay gaps. It’s critical to also track who receives ad hoc awards as studies have found men are more likely to ask for a raise than women. A 2022 YouGov survey shows this gap is narrowly closing, but men who asked for a pay rise were more likely to receive them (68%) compared with women who asked for an increase (63%)
Actively tracking requests and those approved by protected categories can help to identify any systemic issues that may exist.
All too often the way pay is allocated and who gets paid what is cloaked in secrecy.
4. Have you considered whether performance criteria used to determine compensation have bias built in?
Many compensation plans include performance metrics to bring rigor to reward allocation to remove subjectivity. But even this approach can fuel pay inequity. Historically, many schemes are based on metrics that for all intents and purposes rewarded the amount of time you spent in the office, be it billable hours or volume of output.
Women, who more often bear the burden of caring responsibilities and work reduced hours, can simply be qualified out of achieving against such metrics. Reviewing the criteria on which pay is determined to ensure each employee can contribute in a meaningful way is another tactic for maintaining compensation equity.
5. Are pay systems cloaked in secrecy?
All too often the way pay is allocated and who gets paid what is cloaked in secrecy, but transparency in pay systems is essential in uncovering and addressing unlawful pay discrimination. The more complex and less transparent a system is, the more vulnerable it will be to pay inequalities but employers still feel uncomfortable disclosing pay ranges.
If your processes are fair you should have nothing to hide and the right pay framework should be easy to explain because it obviously aligns to how you attract, retain and reward talent. Ultimately transparency breeds trust, not only in leadership but in fair pay.
It’s easy for pay inequality to spread unintentionally across your business despite your best intentions. That’s why it’s important to analyse your policies through the DEI&I lens and commit to ongoing monitoring and evaluation. Then you can make sure there is no gap between your pay policies and practices.