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Pay Equity, Transparency Threatened by Pandemic

Just before the COVID-19 pandemic took hold in the world, the concept of pay equity and pay transparency had evolved from concept to practice.

However, the economic ramifications of coronavirus-induced lockdowns caused many organizations to institute layoffs, furloughs and pay cuts. This financial uncertainty for many employees coupled with empathy for organizations hit hard by the virus threatens to undermine previous efforts of equity and transparency.

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“The fear is these efforts won’t get back to the level they were pre-COVID for many, many years, which means pay equity becomes less of a priority,” said Tanya Jansen, co-founder and CMO of beqom, a compensation management software company. “The answer to any type of crisis like this is to look at where to intelligently make cuts, but also make sure you’re applying fair pay practices to everyone based on factors like performance, etc. There’s a lot of different dimensions that need to be taken into consideration, and we’ve now seen a lot of setbacks, which is very unfortunate.”

Pay transparency, in particular, is an area that took a hit over the past year, likely due to job insecurity. In its “2021 Compensation and Culture Report,” beqom found that just 51% of U.S. workers felt comfortable discussing pay with their direct managers during the pandemic and more men (62%) than women (44%) have felt comfortable bringing up compensation with their manager.

Of employees who were not comfortable speaking with their manager about their compensation during the pandemic, more than a third (37%) said they’re grateful just to have a job and did not think discussing pay would reflect positively, while a quarter (25%) were nervous it would impact their employment status. In 2018, 46% of employees said they would share or discuss salary with colleagues, including 56% of Millennials, in 2020, that share dropped to 40% overall, with a significant 13% drop among Millennials (43%).

Jansen said an additional point of inflection around a drop in discussing pay is the increase of remote work.

“The findings clearly show that pay transparency is not as prolific of a topic when people are working at home,” Jansen said. “Why? Because you’re not having casual conversations with your coworker and your days are more structured and your topics are already pre-defined.”

While many companies pledged to #KeepTheWorldatWork during the early stages of the pandemic, there were still mixed feelings from employees who received pay cuts. The survey found that 51% of employees experienced a pay cut during the pandemic, yet just 24% of employees said their CEO or executive leadership team took a pay cut during the pandemic.

“The perception of how executives have been paid isn’t really positive,” Jansen said. “Maybe that’s more a perception because of lack of transparency and lack of communication, but I see that as needing to change moving forward. People join companies because they believe in the company and the reputation of the company and that’s directly tied to executives and how they behave and how they’re compensated based on environmental factors.”

A lack of employer communication around compensation could exacerbate the issue and erode employee trust. The survey found employees are most interested in understanding the average compensation for every position at their company (37%), compared to the compensation of every member of their team (21%), the compensation of their CEO and executives (17%) and company compensation by demographic (7%). Women (42%) are more likely than men (30%) to want to know the average compensation for every positon, while men (22%) are more likely than women (13%) to want to know the compensation of executives.

While the temptation for companies still in recovery mode might be to limit pay communication for fear it would lead to mass exodus, the opposite is actually true, Jansen noted.

“Because pay equity perceptions have such a strong influence on retention and employee morale,” Jansen said, “it’s incumbent upon organizations to be more transparent and communicative with employees around compensation.”

About the Author

Brett Christie Bio Image

Brett Christie is the managing editor of Workspan Daily.            


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