Pay plays a key role in employees’ sense of belonging in an organisation – get it wrong, and it can damage inclusivity. Transparent and fair policies support a positive workplace culture just as much as any diversity initiative, argues Cathryn Edmondson.Â
Developing genuinely equitable and inclusive pay practices that truly support diverse talent is not easy and subsequently is often overlooked.
Employers can fail to see the ‘why’ or the business case for making sure their compensation practices are inclusive, or are unsure how to build bias-free and inclusive pay strategies.
Since the introduction of gender pay gap reporting in 2017, we’ve seen an increased focus across the board on equality in the workplace, both in terms of pay and diversity of talent.
By opening themselves up to a more diverse cross-section of people – and leaders – companies can prosper financially.
Even in 2018, Boston Consulting Group found that companies with above average diversity in leadership saw 19% higher revenue and improved profitability.
Furthermore, by expanding their talent pools, companies also build a workforce better equipped to relate with clients, their customer base, buyers and suppliers.
The value added by this connection in customer and supplier retention is almost always greater than the investment in training, equipment or pay.
Thinking more holistically, bringing in ‘new’ people also brings fresh ideas and challenges businesses to rethink recruitment and pay practices.
So how do we move beyond traditional approaches to pay? How do we enable ourselves to identify and address pay gaps and instil the kind of cultural transparency where pay reflects the true value of each employee’s contribution, irrespective of their background?
There are four key steps organisations need to take: removing bias from structures and processes; increasing transparency; taking a data-led approach to making decisions and educating managers.
Debiasing processes
This does not have to be complicated. In fact, simplicity can increase equity and inclusion. A job evaluation framework means the sizing of roles can be considered in an objective way, based on consistent criteria.
Alongside this framework, employers could consider regular training with managers, using independent panels to review evaluations and providing guidance on writing job descriptions.
Pay benchmarking can give objective data to help set salaries and build structures around pay, removing bias, and a pay and grading structure based on robust job evaluation and pay benchmarking should be as simple as possible.
On pay progression, if salary growth is based on individual performance or contribution, ensure those processes cannot involve bias.
High contribution or performance can often be mistaken for high workload, which can disadvantage part-time workers or those with caring responsibilities, primarily women.
If pay progression is based on skills acquisition, make sure that everyone in each role is given the same opportunity to upskill, regardless of gender, age or background.
Increasing transparency
Where pay practices lack transparency, employees will often fill the information vacuum by sourcing their own data or drawing their own conclusions.
This misinformation can be hugely damaging, fuelling mistrust, and can be avoided by following some simple guidelines.
- Make the pay and grading framework transparent, clarifying parameters that guide pay decisions;
- Educate and engage employees on how job evaluation and pay benchmarking works, which increases their trust in a bias-free process;
- Publish a pay policy – this will enable employees to understand what influences pay decisions
- Communicate high-level stats on pay awards, as this provides useful context on how reward is managed.
Data-informed decisions
Using robust data to make pay decisions means they are objective and defensible. Pay teams can use a number of approaches to this, including using management information to understand and model future pay decisions, pre-empting anything that could widen a pay gap or disadvantage a certain group.
If pay progression is based on skills acquisition, make sure that everyone in each role is given the same opportunity to upskill.”
Crucially, they should track decisions and their impact, meaning they can measure and correct this over multiple years.
Many employers go beyond legislation, for example tracking ethnicity or social mobility pay gaps that are yet to be required by law. This means they can better understand wider pay inequity and create action plans for change.
Smart HR tools can integrate data points to create richer analysis and lay out the information for people in easy-to-grasp dashboards. Innecto’s tool PayLab enables dynamic pay benchmarking, including the ability to overlay protected characteristics to identify the potential for pay disparity and equal pay risks, for example.
Supporting managers
To create a workplace where pay reflects the genuine value of employees’ contributions, we also need to support managers by enabling them to talk about pay.
And while the amount or scale of managerial input into reward decisions will vary by organisation, increasing their knowledge and understanding around pay will benefit almost every company, so it’s worth investing in training.
Empowering managers to discuss reward processes and decisions helps to build trust within teams – trust which filters down through workers and instils a sense of loyalty and buy-in to the company’s goals.
By opening themselves up to the possibility of these measures, companies can enable business and profitability to grow while allowing diversity to flourish.
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