Willis Towers Watson’s 2016 Global Workforce Study has forged another link in the chain connecting perceptions of pay equity and fairness to employee engagement. The survey showed that compensation is still a top driver of employee attraction and retention (CEB’s Global Talent Monitor agrees), but also found that only a slim majority—53 percent—of employees believe they are paid fairly compared to people in similar roles at other organizations, and most organizations do not have plans in place to address this perception problem:
So far, many employers have not laid the ground work to ensure employees are paid fairly. The 2016 Global Talent Management and Rewards Survey, a survey of more than 2,000 companies globally, including 441 from the U.S., found only half of employers (52%) have a formal process in place to ensure fairness in compensation distribution.
The Global Workforce Study also measured whether employees understand how their base pay is determined and how their total compensation stacks up compared with others. Only about two-thirds of employees (65%) say they understand how their salary is determined, and less than four in 10 employees say they understand how their total compensation compares with that of the typical employee in their organization (39%) and with the typical employee in other companies (34%). When organizations begin to report on the CEO pay ratio and the pay of the median employee, these employees will not have the context to properly interpret those numbers.
This finding speaks to some of the trends motivating the increasing pressure on employers to be more transparent about what they pay their employees and why.
While various changes in the legal and regulatory landscape are forcing some organizations to be more transparent, employees also have access to a lot more information than they used to thanks to sites like Glassdoor and Payscale that are getting increasingly better at helping employees determine their market value. This is one reason why most compensation executives expect their organizations to share more information about pay in the next few years: If a move toward greater transparency is inevitable, it makes sense to get ahead of the game.
CEB Total Rewards Leadership Council members can read more about how to get the most out of pay transparency here.