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"A level playing field." We’ve all heard or read this cliché countless times. Yet there’s truth to it, particularly when confronting the tricky but critical issue of pay equity. Think about two football teams playing on a steep hill. One lucky squad gets to run downhill to score a touchdown, while the other, less fortunate group must run uphill. Clearly, the first team has an advantage.
This is the crux of the issue regarding pay equity. It's not about making sure everyone gets paid equally. Rather, it’s about leveling the playing field so everyone—regardless of demographic factors such as age, race, gender identity, disability, national origin and sexual orientation—receives equitable compensation upon hire and through pay raises based on objective, work-related factors. Indeed.com shows that such factors include (though aren't limited to) education, experience, skills, job performance and tenure with the employer.
All of that might sound perfectly logical and reasonable on paper. However, most leaders would probably agree that devising ways to address pay equity and communicating with employees about it isn’t easy.
Research And Education
In my experience, organizations often run into trouble with pay equity when they take an ad hoc approach to the issue. Different leaders in different departments may handle it in different ways. Or it could go largely ignored altogether.
Optimally, an employer’s leadership team should come together to craft a cohesive statement and set of strategies regarding pay equity. For that to happen, everyone involved usually needs to first educate themselves on the history of the topic, as well as common best practices and current thinking.
Some larger organizations may be able to put together an in-house learning program on pay equity. Otherwise, you could explore engaging outside consultants. For example, consider holding several weekly "lunch and learns" on various aspects of the issue.
Another critical move to strongly consider is a pay equity audit. This is a comprehensive statistical analysis of an organization’s pay history and structure, designed to identify gaps, discrepancies and inconsistencies. Any results that can’t be rationally explained should be addressed.
The bottom line is that to communicate effectively about pay equity, leaders need the background, training and expertise to understand the subject thoroughly and discuss it meaningfully with employees.
The Importance Of Communication
How important is it to communicate with employees about pay equity? A recent study by Gartner Research found that only 32% of employees believe their pay is fair. The study found that communicating clearly about pay equity builds trust and is just as important for employee retention and engagement as talking about competitive compensation and benefits. They found that, while "only 38% of the employees we surveyed report that they understand how their pay is determined... when organizations educate employees about how pay is determined, employee trust in the organization increases by 10% and pay equity perceptions increase by 11%."
The lesson of this study is clear: Communicating about pay equity is important and, if your organization isn’t exactly knocking it out of the park in this difficult area, you’re not alone. So what can leaders do to step up their pay equity games?
Key Discussion Points
First, once you’re familiar with the topic and have clear guidelines regarding your organization’s pay equity policies, identify appropriate scenarios in which to address the issue. Hiring, of course, is a natural starting point. Many employers now include salary ranges in job postings to be more transparent and even-handed about compensation. These ranges also help candidates set a starting point for negotiations.
During job interviews, it’s generally not advisable to ask candidates about their compensation history. Focus the conversation—particularly during the first one or two interviews—on the skills, responsibilities and expectations of the role in question. Defer the salary discussion until the last interview, and be sure to keep it within the context of your organization’s stated salary range for the position.
Once employees are hired and on-boarded, regularly revisit the subject of pay equity as appropriate and necessary. Many employers fold discussions about compensation into annual or semi-annual performance reviews. Although this is a predictable and efficient way of handling things, I believe it's best to separate the two conversations. This helps keep both interactions more objective and less emotional.
During discussions about pay, leaders should be trained and prepared to answer common questions. The specific answers to these queries will naturally depend on your organization’s compensation strategy and policies. But here are some questions to be ready for:
• How does the organization choose its salary ranges?
• Why does my salary fall where it does within the range?
• Why are co-workers or recent hires making more money than I am?
• What is the organization doing to ensure my pay is equitable and competitive?
As you can see, these aren’t always easy questions to answer. That’s why it’s important for leadership at the highest level to address pay equity as a strategic priority, set clear policies about it and then equip leaders farther down the organizational chart with the training and information they need to discuss the topic clearly and confidently with employees.
An Evolving Issue
The issue of pay equity isn’t going away. If anything, it’s becoming more important as employers respond to calls from the workforce and general public for greater transparency and social responsibility. Indeed, in a study released in January 2023 by WorldatWork and Fidelity Investments, 70% of the 534 organizations surveyed reported acting on pay equity. That’s a 4% rise from 2021.
If you and your leadership team are just getting started on the issue, it’s not unusual to feel overwhelmed. Remember to start with the basics: your organization’s historical and current compensation data. And if you’re well on your way with a pay equity strategy, that’s great. Just bear in mind that it’s an evolving issue, requiring regular monitoring and reconsideration.
Lynda Silsbee is Founder and President of the Alliance for Leadership Acceleration. She has spent more than 30 years creating and leading high performance teams. Along with the other LEAP Certified Coaches, she reports that helping managers make the LEAP to leader is one of the most fulfilling aspects of her work.