- More organizations acting on pay equity. WorldatWork’s Pay Equity Study found that 70% of organizations are taking action on pay equity, which is up 10% from 2019 and 4% from 2021.
- Managing legal risk. Organizations are increasingly concerned about the legal risk of pay inequity; since 2020, the proportion citing “mitigating legal risk” as very or extremely influential to their organization’s choice to pursue pay equity has increased by 20% to 71%.
- Beyond legal risk. Nearly a third of organizations that are taking action on pay equity are not subject to salary history bans, salary transparency rules and disclosure requirements.
- Transparency of these efforts still lag. Just over one in 10 organizations surveyed share the high-level results of pay equity analysis publicly and only a quarter share the high-level results with their employees. What’s more, only a third even share the fact that they are doing a pay equity analysis with their employees.
Amid the proliferation of pay transparency legislation covering workers in the United States, more organizations are acting on pay equity.
This was a chief finding from WorldatWork’s “Pay Equity Study,” as 70% of the 421 organizations surveyed took action on pay equity in 2022. This represents a 10% increase from 2019 and a 4% increase from 2021.
The survey, in conjunction with Fidelity, found that only 2% of organizations reported not having pay equity on their radar. Three-quarters of organizations reported that they have been doing pay equity analysis for three years or more compared to two-thirds last year.
Organizations taking action on pay equity cite “it’s the right thing to do,” “to build/maintain a culture of trust,” and “to remove bias against protected classes” as the top three reasons for doing so. The potential cost to fix pay inequities is mentioned as one of the largest barriers for companies that have pay equity on their radar and have not yet acted.
“Increasingly employees want more transparency on how they are being paid and why,” said Sue Holloway, CCP, CECP, compensation content director at WorldatWork. “With more pay transparency legislation being implemented, pay equity has garnered more attention from organizations.”
Managing Legal Risk
Organizations are increasingly concerned about the legal risk of pay inequity; since 2020, the proportion citing “mitigating legal risk” as very or extremely influential to their organization’s choice to pursue pay equity has increased by 20% to 71%.
Organizations that operate in the various state and local jurisdictions that have implemented pay equity or transparency legislation must navigate complex compliance requirements. Thus, organizations subject to salary history bans, salary transparency rules, and disclosure requirements are more likely to be taking action on pay equity (77% vs. 66%).
However, nearly a third of organizations that are taking action are not subject to any such regulations, which could speak to the growing importance of nailing down pay equity from a competitive standpoint.
There is, however, reticence around sharing these pay equity efforts both externally and internally. Just over one in 10 organizations surveyed share the high-level results of pay equity analysis publicly and only a quarter share the high-level results with their employees. What’s more, only a third even share the fact that they are doing a pay equity analysis with their employees.
While there are a variety of factors at play, compensation and legal experts note this could be because of fear of litigation or scrutiny. Tanya Jansen, co-founder of beqom, said organizations could be hesitant to reveal the pay equity work they’re doing internally or externally because they are insecure about the level of progress they’ve made so far.
“When employees see large gaps or bias in their organization’s pay strategy, it’s likely to raise concerns and spark difficult discussions,” she said, “so by waiting to share their pay equity progress until the time is right, organizations can avoid confusion and mistrust with their staff.”
Thus, a dilemma exists for organizations to nail down the communication angle of their continued pay equity and transparency efforts, knowing missteps could be costly. Nancy Romanyshyn, senior director of total rewards strategy and solutions at Syndio, said clear communication around pay practices is expected and still a work in progress for organizations.
“The problem is that many companies are relying on decades-old compensation and leveling structures that were meant for managing compensation — not communicating about compensation,” she said. “But the reality is that we're in the era of transparency, and there's no going back. It’s definitely a transition, so they need a plan to assess where they are today and where they need to be.”
While achieving pay equity and transparency can be an arduous process for compensation teams and organizations, Jansen said it’s a worthwhile endeavor and a competitive advantage.
“Pay equity can be the missing puzzle piece employers need in order to attract candidates and retain top talent,” she said. “After all, over half (55%) of workers say they value fair pay above all other workplace attributes. Therefore, when organizations prioritize pay equity, it shows employees that their employer cares about treating everyone fairly and preventing bias in the workplace.”
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