Equal Pay Day was last week, and while pay equity is an issue that leadership and HR should be thinking about year-round, it’s also a meaningful opportunity to reevaluate your company’s approach to pay equity and overall compensation philosophy. From a talent management perspective, it’s an opportunity to figure out the role that the people function should play in the pay equity conversation.
The gender pay gap is a systemic issue. There are certainly career events that women tend to approach differently — like negotiations and performance reviews — that perpetuate the pay gap, but transparency is paramount for employers looking to promote pay equity. Right now, there is a lack of behind-the-scenes insight into how compensation is determined, and this discrepancy manifests in poor communication between business owners and employees around pay.
According to the “SMB Fair Pay Report” conducted by Zenefits on the gender pay gap at small and midsized businesses, 93 percent of employers said employees are satisfied with communication around compensation. Yet in reality, only 51 percent of employees said the same. Open dialogue and transparency helps employees and leaders understand the “why” behind compensation numbers and bolsters faith in a pay structure, rather than relying on fair judgement of individuals.
But the question today isn’t how to achieve transparency; it’s HR’s role in the transparency equation. Many companies want to address pay equity issues, but given their ubiquity, it is often difficult to figure out where to start.
Here are the three most critical steps HR can take to pursue fair pay policies:
1. Get the Leadership Team on Board
Establishing and promoting pay equity starts with leadership. That doesn’t mean that HR is powerless, but HR is handicapped without support from senior leadership. If leadership isn’t already on board, HR needs to make the case for pay equity and show why it’s important to the bottom line. Fairness, especially fair pay, is a huge factor in employee engagement and motivation. When there is a lack of fairness, people become disengaged.
The takeaway? The CEO and leadership team need to understand the importance of paying employees equally. Cultural tenets and values of a company are no longer intangible benefits that reside in a handbook; people want to work for companies that walk the walk, which necessarily includes, but is not limited to, ensuring fair compensation.
I’ve noticed that intentional bias is not typically behind decisions to pay women less than men. Leaders are just completely unaware about the discrepancies that exist in their organization. This means that educating leadership on what discrepancies exist and how those discrepancies ultimately impact the organization is critical to getting leadership on board with fair pay policies.
2. Do the Due Diligence
Critical to any pay equity initiative is a system that people understand, as well as clear communication about the philosophy behind that pay structure. However, putting together a transparent compensation system isn’t a walk in the park. To create a pay structure that employees understand, it must be rooted in research and solid methodology. No cutting corners.
Internal data is also vital. Use it to break down pay data by gender, role, experience, and make sure to connect all the dots. There might be discrepancies that make sense, but HR needs to be able to explain those discrepancies through outside data to validate what is in place. There is no one-size-fits all approach.
3. Be Prepared for More Savvy Employees and Tough Questions
Over the past five years, the people function has become much more integral to the success of a company. Now, more than ever, HR practitioners must think through issues like diversity, inclusivity and harassment.
The employee’s perspective is changing, too — and equal pay is an issue that leadership and HR need to understand. Around compensation, most people can handle a decision that they don’t agree with as long as they understand that the decision was done in a way that’s fair. And the new generation of employees is going to be more vocal in asking about these things.
As HR and leadership are trying to figure out how to combat systemic issues like equal pay, employees are taking note and finally starting to ask the right questions. Transparency around compensation can help HR in this regard.
The burden of ensuring pay equity doesn’t entirely fall on the shoulders of HR, but HR does play an important role in getting leadership on board; developing a comprehensive, easy-to-understand pay structure; and communicating openly and honestly with employees about expectations and fair pay processes.
The change won’t happen overnight, but as more and more companies dedicate time and resources to overhauling the inequalities ingrained in our systems, HR will become be an integral component of this process.
Beth Steinberg is chief people officer at Zenefits. To comment, email firstname.lastname@example.org.
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