Following an internal review of its pay practices, Nike is raising wages for more than 7,000 of its employees worldwide, the New York Times reported on Monday, in order to equalize compensation among employees in the same roles:
Nike cast the pay changes as part of its effort to maintain a corporate culture “in which employees feel included and empowered,” according to an internal memo sent to staff on Monday. The New York Times reviewed a copy. The company, which is based in Beaverton, Ore., said the changes would affect about 10 percent of its 74,000 employees worldwide. … Nike also announced changes in how it will calculate employee bonuses, which were based on a combination of corporate, team and individual performance. They will now be determined mainly by the company’s results.
Nike reviews pay every year, the memo noted, but conducted what it called a “deeper analysis” this year as part of its investigation into alleged problems that were driving many women to quit. Addressing the discrepancies found in this audit will be expensive for Nike, but one thing most companies don’t realize about pay equity is that this cost of closing pay gaps increases each year, so it will never be cheaper for Nike (or any company) to correct this problem than it is today. Pay gaps don’t have a “one-and-done” solution, however, so it’s important for organizations to continue scrutinizing pay practices from year to year to spot the re-emergence of these gaps and take proactive steps to ensure that their pay practices remain equitable. (CEB Total Rewards Leadership Council members can read our entire landmark 2017 study on pay equity here.)
The change Nike is making to its bonus calculations is also notable, as it reflects the growing understanding of how variable compensation such as bonuses contributes to pay gaps. This “bonus gap” occurs when more men than women (or more white than non-white employees) are promoted to the high-level positions that make them eligible for bonuses, or when unconscious bias affects the performance judgments managers make in awarding them. The significance of the bonus gap was illustrated in the gender pay gap reports UK employers were required to publish earlier this year: Financial firms in particular found that their bonus gaps, in some cases amounting to over 60 percent, were bigger factors in their overall gender pay gaps than differences in base pay.