66% of employers plan to address pay equity this year, survey finds

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Companies are paying closer attention to what they pay their employees these days.

To that point, 66% of organizations recently surveyed by Payscale said a pay equity analysis is a planned initiative in 2022, a 20% increase over last year. Pay equity is essentially equal pay for work of equal or comparable value.

Just over half said they plan to conduct either a gender- or race-based pay equity analysis specifically — the first time this has been a majority in the 13-year history of Payscale’s Compensation Best Practices Report. The pay data and software firm surveyed 5,578 organizations from November to January.

Only 36% of respondents knew their gender pay gap and only 29% knew their racial pay gap.

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“Workplace equity has really become such an important topic,” said Ruth Thomas, Paysale’s pay equity strategist.

Overall, women earn 82 cents for every dollar earned by men. When men and women with the same employment characteristics do similar jobs, women still earn 2 cents less — 98 cents for every dollar earned by an equivalent man, a separate Payscale report found. Over a 40-year career, that disparity costs women $80,000, according to the firm.

Meanwhile, Black women earn 97 cents for every dollar earned by a white man when accounting for similar jobs and qualifications, while Black men have a controlled pay gap of 99 cents.

Most companies are at the early stages of addressing the issue.

“A lot of them are really at this stage focusing on either making the commitment to pay equity, getting internal alignment on how to address pay equity, and then actually getting on and doing that pay equity analysis,” Thomas said.

Pay remediation tends to happen as part of an annual review, while structural and systemic issues could take three to five years to address, she said.

For global medical technology and services company Medtronic, the journey towards pay equity began in the 1990s. As a federal contractor, it had to comply with federal rules. However, pay equity has since matured into a more strategic priority, said Carol Surface, Medtronic’s chief human resource officer.

In the U.S., the company now boasts 100% gender pay equity and 100% pay equity for ethnically diverse groups.

“We just fundamentally believe that having an inclusive environment, where people are treated fairly, drives innovation,” Surface said.

Yet even once pay equity is achieved, it requires ongoing attention.

“You have to do the analysis every year with a focus on every country, every job, and it is perpetual,” Surface said. “It is not a ‘one and done’ exercise.”

War for talent

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For those seeking new jobs as part of the current “Great Reshuffle,” pay transparency and company culture are important factors they consider.

Just over a quarter of respondents to a global LinkedIn survey cited diversity and inclusion as one of the top areas for companies to invest in to improve company culture. A 2020 survey by Glassdoor found that 76% of job seekers and employees said a diverse workforce is an important factor when evaluating companies and job offers.

“Creating more equitable and inclusive workplaces has really become a key employer brand issue, especially for those looking to hire and retain top talent,” Payscale’s Thomas said.

Employees want to know what employers’ records are on fair pay, and can research it, she noted.

Yet there is concern that this war for talent could worsen inequities as companies compete over candidates.

“The good practice we’re seeing is where employers are saying, ‘Okay, I’m bringing someone in, let me understand what the fair range is for this job,'” Thomas said.

If someone comes in way above the pay level of existing talent, they make an effort to adjust pay for them.

“There are also people that aren’t doing that, obviously,” she said.

To be sure, large companies may have an easier time boosting pay, said Emily Dickens, chief of staff and head of government affairs for the Society for Human Resource Management.

“A small company may realize the disparity but is also in the red, so how do you address that disparity immediately?” she said.

“You can’t just identify today that there is a problem and think it will be fixed tomorrow, unless you are a company that is sitting on a lot of cash.”

While Medtronic has reached full pay equity in the U.S., there is still much more work ahead, Surface said.

That includes getting equal representation at every level in the organization and in every job.

“That is a long-term commitment,” she said.

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Sophie Tremblay

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