HR Must Lead on Pay Equity. Here’s What It Can Do

HR Must Lead on Pay Equity. Here’s What It Can Do

Organizations today are increasingly compelled to pursue pay equity for a variety of ethical, reputational, and business reasons, and HR is the most essential contributor to that effort, though it is not the only one. In a recent article at Talent Economy, Zenefits Chief People Officer Beth Steinberg outlined some key steps HR leaders and professionals can take to commit their organization to closing pay gaps based on gender or race. Her first piece of advice? “Get the leadership team on board”:

Establishing and promoting pay equity starts with leadership. That doesn’t mean that HR is powerless, but HR is handicapped without support from senior leadership. If leadership isn’t already on board, HR needs to make the case for pay equity and show why it’s important to the bottom line. Fairness, especially fair pay, is a huge factor in employee engagement and motivation. When there is a lack of fairness, people become disengaged.

The takeaway? The CEO and leadership team need to understand the importance of paying employees equally. Cultural tenets and values of a company are no longer intangible benefits that reside in a handbook; people want to work for companies that walk the walk, which necessarily includes, but is not limited to, ensuring fair compensation.

Steinberg’s other key action items for HR are to “do the due diligence” and “create a pay structure that employees understand … rooted in research and solid methodology,” and to be prepared for tougher questions about pay equity from more savvy and better-informed employees: “Around compensation, most people can handle a decision that they don’t agree with as long as they understand that the decision was done in a way that’s fair,” she notes. “And the new generation of employees is going to be more vocal in asking about these things.”

Much of her advice here resonates with the actions our Total Rewards team at CEB, now Gartner, recommends that organizations take based on the findings of our major 2017 study of pay equity.

Getting the leadership team on board is certainly vital to build credibility with employees that the organization is taking equity seriously: According to our survey data, only one in seven employees believe that their organization is making a credible effort to address pay gaps. Beyond credibility, however, support from high-level leadership sets the tone and makes clear that addressing gaps is a priority for the organization, which will galvanize managers at lower levels to prioritize it as well.

Identifying the magnitude and sources of gaps is also a vital component of a successful pay equity strategy, in keeping with Steinberg’s exhortation to “do the due diligence.” This process has an additional layer, however, as our research last year found it’s not enough to pursue closing gaps as an ad hoc initiative; rather, pay equity assessments need to be integrated as a key process of the rewards function. So yes, HR leaders must do their due diligence, but they also must be prepared to keep doing it every year.

Finally, like Steinberg, we also see open communication with employees as a vital step. Organizations can’t shy away from tough questions; instead, they should take steps to publicly validate employees’ questions and concerns, and show how they are being answered by publicizing the results of efforts to close pay gaps. Pay inequities are often larger in employees’ perceptions than in reality, and these perceptions have a measurable negative impact on retention, morale, and the bottom line. If employees don’t see the organization taking meaningful and transparent action to correct the gaps that exist, they won’t be mollified by mere assurances that the problem isn’t as bad as they think it is.

Another step we’d add to HR’s to-do list when it comes to leading pay equity efforts is identifying not only how to close the current gaps, but how to proactively prevent them from opening up again. Merely correcting inequitable pay treats the symptom, but not the cause. Compensation executives and HR should work to prevent the creation of gaps throughout the compensation lifecycle. This requires integrating equity considerations into salary offers, performance decisions, and promotions, among other HR processes. As Salesforce has found in its three-year quest to close the gender pay gap, keeping that gap closed requires vigilance, consistent commitment, and long-term perspective.

To learn more about how pay inequality could be affecting your organization, check out our list of five things most companies don’t realize about pay equity, CEB Total Rewards Leadership Council members can also read our full study on pay equity here.