Pay equity is vital for talent, engagement, and collaboration, but HR teams struggle to address it

While 70% of companies understand that pay equity is a critical component to their people strategies and their business, only 5% of companies are addressing pay equity well, according to a new study from the Josh Bersin Company, a human capital advisory firm.

Industry analyst Josh Bersin told HR Brew that one underlying issue with tackling pay equity is that it may be conflated with the pay gap.

Pay equity refers to the idea that all individuals should receive equal pay for work of equal value. The pay gap, on the other hand, refers to the difference in earnings between different groups of people, such as different genders or racial groups. The pay gap can be caused by a variety of factors, such as discrimination or differences in education, experience, or opportunity.

“The only way you can figure out what equity is, you have to first take all the people in your company and put them into equivalent job categories or job classes,” Bersin said of pay equity analyses. “Then, you do a statistical analysis of all of the factors…that correlate with increase in pay.”

Every hire, promotion, or raise impacts pay equity, so addressing it can’t be a one-time project. This has to be an ongoing process with guidelines to help HR and managers keep compensation in line with equity goals, Bersin said.

“You have to institutionalize this idea, and then you need a tool or a toolset or a platform that prevents you from…getting back into the old situation again,” Bersin said.

And it’s important to address pay equity, because when companies pay employees differently for the same work, it can negatively impact engagement, teamwork, and trust in leadership, he said.

In fact, the 5% of companies in the study with a more “mature” approach to pay equity boasted stronger people and business outcomes, as well as more innovation.

“[These companies] have statistically studied the factors that contribute to pay variation for years, and they’ve started to learn about where the biases come in, and they’ve explicitly gone back and tried to change things so they don’t create more of this bias.”

Luckily, AI and data analysis tools will make it easier for you to produce pay equity analyses, Bersin predicts. Tools like Trusaic and Syndio help HR address pay equity at their company in real time, and can flag employees who are over or under-compensated.

“A lot of smaller companies are going to look for these tools, and they’re just gonna…put [their] pay increases into this tool and see if they’re good or not,” he said. “I think they’ll just be a different way of paying people as a result of this.”—AD