It’s beyond debate: We live in an era of unprecedented competition for talent. Employees and candidates have the upper hand, and they are using their newfound negotiating position to demand more from employers. What does this mean for employers? Equity in pay matters more than ever.Â
Cultural conversations about equal pay often happen on a big stage — think about the U.S. Women’s National Soccer Team’s battle over equal pay or the ongoing pay disparity between white actresses and actresses of color in Hollywood. But, pay inequity knows no bounds. It exists in every sector.Â
The Hidden Cost of Pay Inequity
In 2020, a Pew Research Center report estimated that women in the United States earned 84% of what men earnedOpens a new window . This is just one example of pay disparities. While the direct costs of unequal pay are obvious (i.e., the underpaid group is literally making less than they should be for the same work), there are several hidden costs with which you may be less familiar:
1. Depleted leadership credibility
Effective leadership rests on trust. Even the perception among employees that they are being paid unfairly can do irreparable damage to employees’ trust in their leaders. This makes effective leadership that much more difficult at a time when most organizations can’t afford to be distracted from executing strategies.Â
2. Decreased engagement and increased turnover
The current labor market is incredibly competitive, and when your people feel mistreated, it is unlikely that they will go the extra mile for you. If they think the system is rigged against them, many will rationally do the bare minimum to get by until they find an employer that’s more committed to pay equity.Â
3. Increased legal risks
What I’m about to tell you should by no means be considered legal advice. But if you think your organization might be systematically overpaying or underpaying certain groups of employees, you might be headed for a legal battle that could hurt your organization’s pocketbook and hurt its brand. Speaking of which …
4. Reputational damage to your consumer and employment brand
Just as unequal pay can hurt your relationship with current employees, it can also seriously damage your ability to attract new employees and customers.Â
Equitable Pay Starts With HR Data
Now that we’ve explored the problem of inequitable pay and how it can hurt your people and your business, we should probably talk about how to address the problem. Paying people fairly is not always as simple as it sounds when so many factors can affect their compensation (e.g., tenure, performance, how well they negotiated salary during hiring, unconscious bias, your organization’s compensation strategy, etc.).Â
To make sense of all these inputs, the best practice is to start at home with the treasure trove of HR data you have at your fingertips. Most organizations still don’t realize how much uncaptured value is laying dormant in their HR systems. However, many of you may still find it difficult to access, clean, merge, and analyze all the relevant people data you need in a timely manner. When you’re trying to move the needle on something this important, it’s usually better to move quickly and show progress early.Â
See More: On-demand Pay: An Employee Wellness Tool Growing in PopularityOpens a new window
Get the Full Picture With an Integrated View of Pay and People
Integrating data from multiple sources is a common challenge, but we shouldn’t let it stand in the way of progress on equitable pay in our organizations. Smart organizations are looking for ways to integrate and analyze HR data in one place and generate insights into the workforce that will help them ensure compensation is fairer and more equitable.Â
When looking for potential analytics solutions, make sure your partner can keep your data encrypted and safe. This should be a major priority no matter what kind of data you’re analyzing. But this concern should really be at the top of your list when you’re looking to analyze something as sensitive as compensation data.Â
Sometimes the data you need to deeply understand a problem doesn’t live in the traditional HR tech stack. You might find yourself looking at data from operational, financial, marketing, or sales systems to get a better, more complete picture of pay at your organization. If you think you might need this kind of broad, integrated view, make sure your people analytics partner has the ability to include data from non-HR systems.Â
Work Toward Greater Pay Transparency With Your PeopleÂ
As you identify and address the causes of pay inequities in your organization, make sure to share this information with your people. When it comes to compensation, even the perception of unfairness can deeply harm your culture and drive down engagement. While you might not feel comfortable disclosing every last cent everyone in your organization is paid, don’t keep them ignorant of your pay practices. It’s much better to be open with your employees about where your gaps are and discuss how you’re closing them. If you keep your people in the dark about it, they will rely on rumors and gossip to explain everything instead.Â
Pay inequity is a persistent issue that can do real damage not only to its direct victims but also to the organizations that knowingly or unknowingly allow it to continue. Fortunately, HR data, coupled with the ability to integrate and analyze it, can be your best friend in uncovering and addressing pay inequity at your organization. Think carefully about the tools you might need to get this job done and make the world a better place one paycheck at a time.
How are you leveraging HR data and analytics to close pay gaps for your employees? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .