Pay is a major factor in the sense of belonging employees feel in an organization. If it’s done wrong, it can harm inclusivity. Cathryn Edwardson argues that transparent and fair policies are just as important as diversity initiatives in fostering a positive work culture.
It is difficult to develop truly equitable and inclusive compensation practices that support diverse talent.
Some employers may not understand the “why” or the business case behind ensuring that their compensation practices are fair and inclusive. Others aren’t sure how to create strategies for inclusive and bias-free pay.
Since 2017, when the gender pay gap was first reported, there has been a greater focus on equal pay for women and diverse talent.
Companies can benefit financially by attracting a diverse range of people and leaders.
Boston Consulting Group reported that in 2018, companies with leadership diversity above the average saw a 19% increase in revenue and profitability.
By expanding their talent pool, companies can also create a workforce that is better able to interact with their clients, customers, buyers, and suppliers.
This connection is often more valuable than training, equipment, or pay.
Think more holistically. Bringing in “new” people brings new ideas, and challenges companies to rethink their recruitment and compensation practices.
How can we go beyond the traditional approach to pay? How can we identify and close pay gaps, and create a culture of transparency that reflects the value of every employee’s contributions regardless of their background?
Four key steps are needed by organisations: removing bias in structures and processes, increasing transparency, taking a data driven approach to decision making and educating managers.
Debiasing processes
It doesn’t have to be difficult. Simplicity can actually increase equity and inclusion. With a job evaluation framework, the size of roles can be evaluated objectively and based on consistent criteria.
Employers could also consider providing regular training to managers, evaluating evaluations by independent panels, and guidance on how to write job descriptions.
Pay benchmarking is a way to get objective data that can be used to set salaries, build structures, and remove bias. A pay and grading system based on robust evaluation of jobs and pay benchmarking, should also be as simple as it can possibly be.
If the salary progression is based upon individual performance or contributions, make sure that these processes are not biased.
Some people mistakenly believe that high performance or contribution is synonymous with high workload. This can be detrimental to part-time employees or women who have caring responsibilities.
If the basis for pay progression is skills acquisition, ensure that all employees in every role have equal opportunities to upgrade their skills, regardless of age, gender or background.
Transparency is increasing
Employees will fill in the information void when pay practices are opaque by gathering their own data and drawing their own conclusions.
Follow these simple guidelines to avoid this misinformation, which can fuel mistrust and be damaging.
- Clarify the parameters that guide pay decisions and make the framework of pay and grading transparent;
- Employees will be more trusting of a fair process if they are educated and engaged about how the job evaluation and benchmarking work.
- Publicly publish a pay policy. This will help employees understand the factors that influence pay decisions.
- It is useful to communicate high-level statistics on rewards, since they provide context for how the reward system is managed.
Data-informed decisions
When you use robust data, your pay decisions are objective and defendable. To do this, pay teams can take a variety of approaches, such as using management data to model and understand future pay decisions. This will help them to avoid anything that might widen the pay gap or disadvantage certain groups.
“If pay progression is based upon skills, ensure that all employees in every role have the same chance to upgrade their skills.”
They should also track their decisions and impact so that they can monitor and correct it over several years.
Many employers do not follow the law. For example, they track ethnicity and social mobility pay gap that is yet to be mandated by legislation. They can then create plans to address the wider issue of pay inequality.
Smart HR tools integrate data to produce richer analyses and present the information in dashboards that are easy to understand. Innecto’s PayLab tool allows dynamic pay benchmarking. It also includes the ability to overlay protected attributes to identify potential pay disparity or equal pay risks.
Supporting managers
We need to empower managers to discuss pay in order to create an environment where employees are paid according to their true value.
Training is worth it, even if the level of managerial involvement in pay decisions varies by company.
It is important to empower managers to talk about reward decisions and processes. This builds trust in teams, which then filters down to workers who feel more loyal and committed to the goals of the company.
By embracing these possibilities, businesses can grow their business and profits while also allowing for diversity.
