Pay plays a key role in employees’ sense of belonging in an organization – get it wrong, and it can damage inclusivity. Transparent and fair policies support a positive workplace culture just as much as any diversity initiative. Developing genuinely equitable and inclusive pay practices that truly support diverse talent is not easy and is often overlooked. Employers can fail to see the ‘why’ or the business case for making sure their compensation practices are inclusive, or are unsure how to build bias-free and inclusive pay strategies.
Since the introduction of gender pay gap reporting in 2017, there has been an increased focus on equality in the workplace, both in terms of pay and diversity of talent. By opening themselves up to a more diverse cross-section of people – and leaders – companies can prosper financially. Even in 2018, Boston Consulting Group found that companies with above-average diversity in leadership saw 19% higher revenue and improved profitability. Furthermore, by expanding their talent pools, companies also build a workforce better equipped to relate with clients, their customer base, buyers, and suppliers.
The value added by this connection in customer and supplier retention is almost always greater than the investment in training, equipment, or pay. Thinking more holistically, bringing in ‘new’ people also brings fresh ideas and challenges businesses to rethink recruitment and pay practices. So how do we move beyond traditional approaches to pay? How do we enable ourselves to identify and address pay gaps and instill the kind of cultural transparency where pay reflects the true value of each employee’s contribution, irrespective of their background? There are four key steps organizations need to take: removing bias from structures and processes; increasing transparency; taking a data-led approach to making decisions and educating managers.
1. Eliminate Bias from Systems and Procedures
This does not have to be complicated. In fact, simplicity can increase equity and inclusion. A job evaluation framework means the sizing of roles can be considered in an objective way, based on consistent criteria. Alongside this framework, employers could consider regular training with managers, using independent panels to review evaluations and providing guidance on writing job descriptions. Pay benchmarking can give objective data to help set salaries and build structures around pay, removing bias. A pay and grading structure based on robust job evaluation and pay benchmarking should be as simple as possible.
On pay progression, if salary growth is based on individual performance or contribution, ensure those processes cannot involve bias. High contribution or performance can often be mistaken for high workload, which can disadvantage part-time workers or those with caring responsibilities, primarily women. If pay progression is based on skills acquisition, make sure that everyone in each role is given the same opportunity to upskill, regardless of gender, age, or background. This kind of structured approach ensures that pay decisions are made fairly, without inadvertently disadvantaging any particular group.
By debiasing systems and procedures, organizations can make significant strides toward ensuring all employees feel valued and appreciated, regardless of their background. It reinforces the idea that everyone has equal opportunities for professional growth and development based on their abilities and contributions alone. Organizations should invest time in creating and maintaining these unbiased frameworks. Consistent use of objective measures for job evaluation and pay decisions is essential. By doing so, businesses can close pay gaps and foster a more inclusive workplace culture that benefits everyone.
2. Enhance Transparency
Where pay practices lack transparency, employees will often fill the information vacuum by sourcing their own data or drawing their own conclusions. This misinformation can be hugely damaging, fueling mistrust, and can be avoided by following some simple guidelines. Make the pay and grading framework transparent, clarifying parameters that guide pay decisions; educate and engage employees on how job evaluation and pay benchmarking works, which increases their trust in a bias-free process. Publish a pay policy – this will enable employees to understand what influences pay decisions, and communicate high-level stats on pay awards, as this provides useful context on how reward is managed.
Employers should prioritize open communication when it comes to pay practices to avoid any confusion or suspicion among employees. By providing clear and consistent information about how pay decisions are made, companies can foster a sense of fairness and trust within the workforce. This includes explaining the criteria used for job evaluations, how pay benchmarks are set, and the policies that guide salary adjustments and increases. Such transparency not only helps build trust but also empowers employees to have informed discussions about their pay and role in the organization.
Additionally, companies should actively involve employees in the conversation about pay practices through workshops, meetings, or regular information sessions. This engagement can help demystify the processes behind pay decisions and address any concerns or misconceptions before they escalate. Transparent communication reinforces the company’s commitment to fairness and inclusivity and ensures that all employees are on the same page regarding how their compensation is determined. This effort can lead to a more harmonious and motivated workforce, where individuals feel respected and valued for their contributions.
3. Make Data-Driven Decisions
Using robust data to make pay decisions means they are objective and defensible. Pay teams can use a number of approaches to this, including using management information to understand and model future pay decisions, pre-empting anything that could widen a pay gap or disadvantage a certain group. Crucially, they should track decisions and their impact, meaning they can measure and correct this over multiple years. Many employers go beyond legislation, for example tracking ethnicity or social mobility pay gaps that are yet to be required by law. This means they can better understand wider pay inequity and create action plans for change.
Smart HR tools can integrate data points to create richer analysis and lay out the information for people in easy-to-grasp dashboards. For instance, Innecto’s tool PayLab enables dynamic pay benchmarking, including the ability to overlay protected characteristics to identify the potential for pay disparity and equal pay risks. Utilizing such tools allows organizations to analyze pay data more comprehensively, identifying trends and disparities that may not be immediately apparent. This data-driven approach ensures that pay decisions are rooted in factual evidence and are sustainable over the long term.
Regularly reviewing and updating pay practices based on these insights is essential for maintaining an equitable compensation structure. It also demonstrates a company’s commitment to fairness and inclusivity, showing employees that management is vigilant about identifying and addressing any pay disparities. Companies that proactively use data to fine-tune their pay practices stand a better chance of achieving pay equity, thereby enhancing their reputation as ethical and inclusive employers. Ultimately, data-driven decisions help create a more transparent and trustworthy workplace where employees feel confident about the fairness of their compensation.
4. Educate Managers
Pay is crucial to employees’ sense of belonging in an organization. If it’s mishandled, it can hurt inclusivity. Transparent and fair policies are essential for a positive workplace culture, on par with diversity efforts. Building truly equitable and inclusive pay practices is difficult and often neglected. Employers may not understand the importance of inclusive compensation or might not know how to develop unbiased pay strategies.
Since the introduction of gender pay gap reporting in 2017, there has been a heightened focus on workplace equality in terms of pay and diversity. Embracing a more diverse range of people and leaders can significantly benefit companies financially. In 2018, the Boston Consulting Group found that companies with above-average diversity in leadership had 19% higher revenue and better profitability. Expanding talent pools helps companies form a workforce that relates better with clients, customers, buyers, and suppliers.
The value of retaining customers and suppliers usually outweighs investments in training, equipment, or pay. Bringing in new people introduces fresh ideas and challenges businesses to rethink recruitment and pay practices. To move beyond traditional approaches to pay, organizations should take four key steps: eliminate bias from structures and processes, increase transparency, adopt a data-driven approach to decision-making, and educate managers.