Less than a third of employees feel that their pay is fair, according to a survey by analyst company Gartner, while almost two-thirds think their pay is unequitable and are at higher risk of leaving.
Gartner’s survey of around 3,500 employees found that staff who consider their pay unjust have a 15% lower intent to stay with their current employer, and are 13% less engaged than those who think their pay is fair.
Last year, a Gartner survey found that 84% of reward leaders are conducting pay equity audits annually in a bid to close pay gaps.
“Employee perceptions of pay equity aren’t rooted in compensation,” said Tony Guadagni, senior principal in Gartner’s HR practice.
“Instead, the main driver of perception is organisational trust – when employees don’t trust their employers, they don’t believe their pay is fair or equitable.”
Gartner found that the key factor in whether employees felt they were being paid fairly was trust in their employer. Accordingly, businesses need to rebuild trust where employees’ perceptions of their pay are negative.
Its survey revealed that only 38% of employees understand how their pay is determined. When organisations communicate and educate employees about pay decisions, their trust increases by 10% and perception of pay equity by 11%.
Colleagues are likely to be sharing salary details already – in a survey conducted by the analyst firm earlier this year, 43% of employees discuss pay with colleagues in the same role, and 45% consult third-party salary sites.
Guadagni said many of the reasons for pay inequity stem from manager decisions around hiring, promotion and performance assessment, meaning it’s crucial to broaden accountability around pay decisions.
“HR leaders need to equip managers with tools that will enable them to make equitable pay decisions while remaining responsive to the other demands on the business,” he added.
“Managers should have access to dashboards that compare pay across their teams and be trained on the critical factors that should differentiate employees’ pay.”
He advises organisations to develop a pay equity team that “has broad insight into the factors that cause pay equity gaps and the authority to correct them”.
“An ideal pay equity team consists of leaders and employees across levels, business units and functions with insight into the practices and processes that create pay equity gaps and a visible commitment to pay equity within the organisation,” he said.
‘Inflation’ is word of the year
Separately, research published today by Glassdoor reveals that “inflation” is its word of 2022 after a 232% spike in mentions on the review site compared with 2021.
Discussion of “layoffs” and being made “redundant” surged by 101% this year as well, suggesting employees’ fears around job security and the cost of living are influencing their choice of employer.
Lauren Thomas, Glassdoor’s UK economist, said: “Besides the economy, employees have been talking about how the great resignation and hiring difficulties of 2022 have led to burnout and created high pressure, fast-paced workplaces with frequent turnover.
“However, while the economy and tight labour market are difficult for employers to change, there are initiatives which are appreciated by staff. Glassdoor’s research shows that employees value flexibility, hybrid working and opportunities to make in-person connections with their colleagues. These trends give employers a guide as to what is important to workers heading into the New Year.”