There’s no getting around it: Workers want pay equity and pay transparency. In fact, research from the Josh Bersin Company found that employees favor fairness over compensation.
And pay equity can really pay off, with organizations that excel in pay equity reporting higher profitability and greater success in attracting and retaining top talent.
But in a competitive market, pay equity can be difficult to get right, especially as companies navigate an uncertain economy. Affirmity’s State of Pay Equity 2023-24 report shines a light on how companies are handling pay equity and transparency – and where they’re going wrong.
Here are the takeaways that HR needs to know about, plus action steps to improve pay equity practices.
The state of pay equity
The study defined pay equity as “the practice of compensating employees the same way for the same work, regardless of factors such as gender, race, disability, or religion. … It may also be viewed as comparable pay for similar jobs within the same organization.”
Overall, the majority of respondents – about 7 in 10 – rated their organization as mediocre or below in the area of pay equity. But the same number are also hopeful for the future, with 7 in 10 believing their organization will become more equitable over the next two years.
Despite the growing importance of pay equity, only about a third (34%) say it is among the top five priorities in their organizations. For those who do prioritize pay equity, they do so to:
- Retain the right talent (63%), and
- Ensure fairness (60%).
Some of the most common methods to determine pay equity were comparisons of pay among comparable jobs (77%) and comparisons within pay bands (70%).
When doing a pay equity analysis, organizations examined factors such as:
- Demographics, such as gender identity (81%) and race/ethnicity (71%)
- Job-related factors, such as role (77%) and performance (69%).
The state of pay transparency
Affirmity’s study also focused on pay transparency, which it defined as “organizations communicating with employees about how their pay is determined.”
For 2023 and beyond, pay transparency is becoming more and more important as states mandate transparent salaries. Even when companies aren’t in a state where they’re legally required to do so, many have embraced pay transparency as a way to stay competitive.
Despite its growing importance, only one-third rate their organization’s pay transparency practices as excellent (12%) or above average (22%).
And, although two-fifths say their organizations include salary ranges for all job postings, 17% only use ranges for some job postings, and 16% only do so where legally required. While a quarter do not include salary ranges currently, 1 in 10 of those are considering doing so in the future.
Affirmity’s study also uncovered an interesting discrepancy between organizations in different locations: Those that operate in a single U.S. state were more likely to include salary ranges for all job postings (66%), while those that operate in multiple states were less likely (43%). Organizations that operate in multiple countries including the U.S. were the least likely (32%) to include salary ranges in all job postings.
How HR can move the needle on transparency & equity
Fair pay practices are good for your people and your business – so how can HR help become a more equitable workplace?
Affirmity’s study found some behaviors of more equitable organizations that organizations can use as a guide to work toward pay transparency and equity.
Here are a few best practices:
- Include salary ranges for all job postings
- Use various methods to determine salary ranges, such as government sources and market analysis
- Conduct routine pay equity analyses
- Find strategies to detect equity gaps, and
- Make hiring offers based on factors other than salary history.