Research has found that there are significant gaps in perceptions around pay equity between senior leaders within an organisation and their overall employee base. 75% of business leaders believe that their company prioritises pay equity, but less than half (47%) of their employees agree.
To conduct the research, more than 1,000 HR leaders, business leaders, and employees across the US and UK were surveyed. Results indicate that half (45%) of employees think pay inequalities exist within their company.
However, there are varying levels of confidence in how effective their organisation is at achieving pay equity, with business leaders being the most confident (77%), followed by HR leaders (69%), while employees are the least confident (50%). Further to this, the research found that 7 out of 10 leaders (71%) believe that current pay transparency practices are effective, while only 39% of workers agree.
Leadership confidence in these pay equity efforts is perhaps driven by an understanding of the ramifications of pay inequity to their organisations. 47% of HR leaders note inaction leads to reduced employee retention, while 44% of business leaders say it can lead to reduced productivity. Conversely, if action is taken, businesses can reap many rewards. For HR leaders the biggest advantage is improving diversity, equity, and inclusion in their workforce (54%), while business leaders are focused on increasing employee productivity (47%).
The study also found that pay transparency initiatives were largely driven by employee expectations (52%), candidate expectations (41%), and the belief that pay transparency is the right thing to do (41%).
With businesses understanding not only the societal importance of having pay equity, but also the strategic business impact that pay equity brings, senior leaders are being brought in to lead the charge. Almost half of business leaders (45%) say that the CEO should be responsible for leading pay equity initiatives, while senior HR leaders are significantly more likely to say the CHRO should be responsible (25% vs. other business leaders 14%).
Zara Nanu, CEO of Gapsquare, part of XpertHR comments: “Pay equity is not only a societal matter, but also a business one too. With employee performance, retention, and attraction impacted by pay equity, businesses are right to see this as a critical issue, and one the C-Suite leaders need to put onto their agenda. The gap between what leaders see and what employees view is disparaging. While leaders know action is being taken, they may not reap the business benefits of such work unless employees are brought into the process and kept up to date on activity.”
Jeanne Meister, EVP, Executive Networks and author, adds: “Pay equity is moving up the corporate agenda, and HR is beginning to understand it’s growing beyond a DEI matter and evolving into a core pillar of a business’ strategic ESG plans. For HR leaders, this should be a welcome development. There is now a clear business case to be made for pay equity to get board level input and investment required, but employees need to be brought along this journey too. Here HR can shine, bridging the gap between leaders and employees, to take the entire organisation to more transparent and equal pay.”
*Research from XpertHR and Executive Networks