- Many have a strategy gap. According to a recent beqom study, one-third of organizations don’t have a strategy in place for addressing pay equity.
- The impact is potentially large. Not having a pay equity strategy can harm recruitment and retention, employee trust and engagement, and an organization’s branding and reputation, in addition to creating legal risk.
- Take a proactive, iterative approach. Don’t wait for perfect data — implement a pay equity analysis and strategy now and revise as needed.
A considerable portion of employers have not established a pay equity strategy — and even more doubt their organization complies with global pay equity standards, according to the 2024 State of Pay Equity Report from beqom, a total compensation software company.
The report, which surveyed organizations in the United States and United Kingdom, found 34% of participating employers do not have a pay equity strategy in place, with that number rising to 50% for those in the U.S. healthcare and technology sectors.
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With only 68% of the gender pay gap closed globally, and little movement in the United States in the last two decades, more work needs to be done, beqom noted. And, waiting isn’t an option, said beqom co-founder Tanya Jansen.
“You have to start now,” she advised. “Deferring the topic is just making the problem worse. There’s a huge cost to not addressing a pay gap — if you don’t close the gap, it’s just getting bigger.”
Challenges With Pay Equity Strategies
Organizations without a pay equity strategy may have a lack of support from leadership; limited data, resources or budget to address identified pay gaps; or difficulty aligning pay equity efforts with merit pay or compliance regulations, said Gail Greenfield, executive vice president of pay equity and total rewards strategy and solutions at Trusaic, a pay equity and regulatory compliance software company.
Some of the organizations surveyed by beqom are working to address gaps by listing salary ranges, increasing pay to correct existing pay gaps and salary inconsistencies, providing clear structure for bonuses and performance review processes, and more.
But while two-thirds of organizations have a pay equity strategy, beqom noted that many may need to re-examine their current strategies, as nearly half of surveyed entities said their approach to pay equity is hurting their ability to attract talent.
Global Compliance Shortfalls
Building a pay equity strategy that aligns with U.S. and global pay compliance standards can mitigate legal risk.
Almost 90% of employers surveyed by beqom support legislation mandating pay transparency practices. However, only 41% of organizations said they are aware of global pay equity standards, while 54% said they doubt they comply with those standards.
“With pay transparency legislation picking up steam around the world, it is crucial for employers to understand their unique pay equity situation and challenges,” said Tauseef Rahman, partner and career practice growth leader for Northern California and Hawaii at Mercer.
Utilize Data and Technology
Although 89% of surveyed employers use technology to manage compensation strategies, only 15% use a pay equity tool for compensation management, Jansen said, which likely is a major missed opportunity, as pay equity tools can help organizations continually adjust to changing compliance guidelines.
The longer an organization waits to create a pay equity strategy, the more costly it may become to close existing pay gaps — in some cases, that cost increases by as much as $500,000 a year, according to a Gartner report.
“It’s important not to wait until the data is perfect,” Greenfield said. “Organizations can work with the data they have and, over time, begin improving data quality and collecting additional data elements.”
Communicate Pay Equity Strategies
Only 59% of surveyed organizations said they plan to share their goals for closing pay gaps in 2024.
But communicating compensation factors and solutions to workers is a critical aspect of a pay equity strategy, Jensen said: “Nothing alienates employees more than knowing that they’re paid unfairly.”
Employees who perceive their pay and promotion opportunities as fair and equitable are more likely to thrive in their workplace, according to Mercer’s 2024 Global Talent Trends report.
Sharing outside the organization plays a role as well. “Companies that publicly disclose their pay equity commitment are often better equipped to tackle pay equity challenges successfully,” said Muriel Taing, principal and senior compensation consultant at Mercer. “This open commitment often creates a degree of accountability.”
Creating a Strategy
beqom and Greenfield offered the following tips for employers, based on their research:
- Conduct pay analyses on a regular basis.
- Utilize technology and data to promote fair compensation decisions.
- Embed pay equity systems into the full employee life cycle.
- Create a sustainable culture of pay equity.
- Use pay equity insights to identify and address other equity issues.
- Create a three-year pay equity action plan.
- Use free pay equity checklists, pay equity software or consultants to help.
Tackling pay inequities may help an organization attract and retain top talent, improve its reputation, build trust with employees and boost engagement, and mitigate legal risk, Greenfield said — but that likely will only occur if the organization moves beyond lip service and invests in a legitimate, long-term strategy.
“The obvious reason for a pay equity strategy, aside from the compliance aspect, is that it’s the right thing to do,” beqom’s Jansen said. “I’m always surprised that it’s still a topic in the many years I’ve been doing this. It’s an issue, but it doesn’t need to be [one].”
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