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Pay transparency fuels perceptions of pay equity

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Background from parts of dollar bills in round sectors of different sizes Many employers continue to struggle with ensuring pay transparency and countering legacy practices, both of which can lead to pay inequities, affecting motivation and relationships at work as well as the employer’s brand and reputation. Pay transparency may not be the singular cure for racial and gender pay gaps, but it is a good starting point to remove barriers and improve accurate information about employee compensation.

Grant Thornton’s By the Numbers pulse survey, on the topic of employee retention, was conducted during the month of June 2021. The results identified several areas that employers can consider as they examine their employee retention strategies and management practices for the future.

By the Numbers

Differentiated practices. Results suggest that the level of pay transparency that employees experience with their employer is very different. Where nearly 50% of respondents indicate they can access details around compensation philosophy and factors considered when setting pay, a large percentage only receive basic information or do not have insight into the broad range of potential.

Definitions of pay equity. Given a range of possible definitions of what pay equity means to the workforce, we found that the majority of survey respondents focused on internal equity matters, with less than 15% considering pay equity to defined as “paid fairly relative to the going market salary.” More than 50% believe pay equity to exist when “no significant pay gaps exist between race or gender that can't be explained by performance, experience or other job factors.”

Transparency and perceptions of pay equity. It’s no surprise that we found a strong correlation between the level of pay transparency and perceptions of pay equity. Respondents who indicated a belief that no difference in pay existed across genders at their organization were more likely to have experienced a greater level of pay transparency practices. On the other hand, participants who reported a belief that men were paid more than women at their organizations had more limited access to information about pay practices.

2022 planning opportunities. It is crucial that organizations examine their employee retention strategies on a recurring basis and from a variety of perspectives for the foreseeable future.

  • Strengthen pay transparency at critical points in the employee experience. At a high level, pay transparency practices help management reinforce the efforts the organization makes to structure meaningful employee experiences and mitigate the risks of legacy business processes that create pay disparities.
  • Pay equity review. Some form of a pay-equity ratio measure is likely to be voluntarily reported in public company disclosures this year as one of the measures adopted to meet future SEC requirements, as well as increased use by nonprofits where public scrutiny is high. By taking a proactive response, employers can be more prepared to improve pay transparency practices and potential inequities that are created by legacy practices.
  • Employee listening. The COVID-19 experience has elevated many organization’s internal communication capabilities as the need to inform employees about new workplace practices. The shift to active listening creates another opportunity for employers to gain insights into perceptions of compensation and the level of transparency that can follow from brief pulse surveys, open-door exchanges, and mentorship opportunities to engage top performers and critical workforce segments.

Compensation programs are essential to achieve the strategic goals of businesses and attract and retain the talent necessary in today’s competitive business environment. Conducting regular reviews of broad-based employee compensation arrangements improves alignment to longer-term objectives and identifies potential human capital risks. By improving the levels of transparency, employers can better structure their compensation plans and communications to help win the battle for an increasingly valuable workforce.

Contacts
Bob Lemke
Director, Human Capital Services
T +1 312 602 8969

Ken Cameron
Director, Human Capital Services
T +1 404 704 0136

Andy Mechavich
Director, Human Capital Services
T +1 312 602 8167

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