Employee Engagement & Retention

What to Do When Pay Equity Efforts Disappoint Employees

By Eliza Haverstock

Last updated: Feb 15, 2023

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The Org spoke with a DE&I expert to learn how organizations can work towards pay equity — and be more transparent with employees along the way.

Employees and employers have very different opinions about how pay equity looks at their organization, a new survey found. (Getty)
Employees and employers have very different opinions about how pay equity looks at their organization, a new survey found. (Getty)

Increasingly, organizations are prioritizing equal pay among men, women and underrepresented groups — but employers and employees still hold vastly different perceptions about the success of these efforts, bringing new questions to light: are organizations exaggerating their focus on major DE&I issues? And what can be done to win back employees’ trust?

Seventy-four percent of executives consider pay equity a moderate or high strategic priority, yet only 41% of employees say their companies have proven “very successful” in achieving this goal, according to a new study on U.S. pay equity published by global HR consultancy UKG and Harvard Business Review’s polling arm. More than 430 employers and 3,000 employees participated in the survey, released in late September.

The Org spoke with Brian K. Reaves, UKG’s Chief Belonging, Diversity and Equity Officer, about his survey takeaways and actionable steps that organizations can take to foster pay equity – transparently. Reaves has a track record of doing so himself: He led diversity and inclusion efforts at tech giants like Dell and SAP before joining UKG in 2021.

Transparency in the workplace is key

To Reaves, equity boils down to four components: pay, opportunity, representation and wellness. Each requires quantitative and qualitative data to unearth the root cause and find solutions, he said. When it comes to achieving pay equity and building trust with employees, embracing salary transparency can be a good place to start.

“Transparency gives you facts,” Reaves said. “People fear what they don’t know and typically assume the worst — otherwise, why wouldn’t that information be made public?”

On the importance of transparency, he elaborated: “Organizations need to recognize that while transparency may open up the floor to more questions, those that share with their employees a message that ‘we are not perfect, we are on a journey, here’s where we are now and here’s where we want to be,’ will be able to lead with trust, empathy and accountability. Transparency helps organizations hold themselves accountable, while also confirming to employees that their leaders value them and are set to create an equitable workplace.”

The decision-makers for pay equity

So, who in the organization should be responsible for pay equity? It depends on who you ask. About 37% of employees point fingers at the CEO — who they view as the ultimate business decision-maker — while just 6% of employees think the Head of HR should lead the charge, the survey found. On the other hand, 47% of executives say the HR Chief should be responsible for pay equity, and 39% of executives think it’s the CEO’s job.

In reality, no single person should carry pay equity entirely on their shoulders, Reaves explained. Team managers, for example, are directly involved with merit raises and other hiring decisions that can influence pay equity.

“It needs to be a team effort with transparency and investment from the top. When an [HR Chief] is empowered by the CEO, they can do so much more. It is quite powerful for employees to hear their CEO say, ‘This is important to me, this is a priority, and I trust our [HR Chief] to get the job done,’” Reaves said. “From there, accountability will cascade down through line managers.”

Disparities beyond the gender divide

Pay equity discussions often call up a familiar statistic: Women make 83 cents for every dollar a man makes. While gender wage gaps have no place in the workplace (and they were in fact made illegal with the 1963 Equal Pay Act, Reaves said employers should also consider employees’ intersectional identities when building equity programs.

“Companies looking to address equity through the traditionally narrow male-female dynamic are setting themselves up for failure,” Reaves asserted.

Notably, the survey found a clear gap in pay equity perception between white men and other groups. While half of white male workers rate their organization as highly successful at achieving pay equity, only 37% of white women and 35% of Black/African American women, Hispanic/Latinx women and Hispanic/Latinx men share the same positive outlook.

“Quantitative data can uncover systemic disparities like pay, and the outcome of performance reviews for certain groups,” he said. “However, there is also a qualitative facet to the lived experiences of different groups, and that’s where we see this perception gap in overall equity taking shape.”

Employer brand takes a hit from turnover

Employer brand – or an organization's reputation both internally and externally – exists whether or not anyone's looking after it, and it's easily tarnished when employees are disappointed and turnover is high.

Per the survey, 71% of organizations say that a key benefit of pay equity is improved retention, followed by building a stronger company culture (60%), greater employee engagement and productivity (60%), improved ability to acquire new talent (58%) and encouraging and increasing workforce diversity (55%).

On the flip side, a weak company culture and employer brand can lead to a harmful turnover cycle – and even create an inequitable workforce.

“Employees are the single most important asset for a business," Reaves said. "When employee engagement decreases, it’s much harder to retain them which leads to higher turnover and a more difficult path to success as a company. And low employee retention leads to other issues, like a widened pay gap."

The pay gap widens because employers may need to pay a salary premium to back-fill jobs. "When the market settles, you will find you’re paying way more for one employee than another, and you have a gap again,” he said.

Taken altogether, salary transparency is an opportunity for companies to publicly voice their values and build an employer brand and culture where people of all backgrounds can thrive for years to come.

The work towards pay equity is never done

Inequity problems won’t be solved overnight, and the conversation extends beyond compensation. Recruiting practices like educational requirements are just one example of excluding candidates for factors that don’t necessarily reflect their ability to succeed in a certain role.

“Many people are biased toward candidates who come from schools they see as elite or that are similar to their own. Some companies even determine salaries based on educational background,” Reaves said. “But affording college is inherently a privilege and not an indicator of particular skills. In fact, many companies are rethinking college degree requirements and leaning into skills-based hiring to broaden the talent pool and create more equitable processes.”

Pay is just one piece of the equity puzzle, which requires constant, careful attention from company leaders. Your organization should never cross it off the to-do list.

“Inequity is a systemic and long-standing problem, so the solution must be systemic and ongoing. This is not a check-the-box-and-move-on process,” Reaves said. “Leaders must regularly and consistently evaluate every people-focused process they have – from recruiting through off-boarding – to understand the systemic nature of pay inequity in their organization.”

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