CEO BLOG - Pay Equity

In 2021 we commissioned a research survey that revealed. 

• 73% of companies do not consolidate all forms of reward in their pay equity reporting. 
• 76% of companies consolidate pay equity data once a year (to produce an annual audit). 
• 93% of companies cannot show reward decision makers the 1) current status of pay equity or 2) the impact their decisions will make on pay equity.

So, the vast majority of pay equity data refers to incomplete and out-of-date data, and managers who decide on pay cannot see if their decisions will make things better or worse.

My hunch is that CEOs, shareholders, the media, and wider society, who show so much interest in EDI, aren’t aware of this. They think pay equality analysis includes everything, In reality, it is usually just looking at compensation. The missing chunk is not small. It amounts to about 30% of the total spend on employee reward but as it sits in many different systems it is too difficult to access, so it is ignored or averaged across the whole. The 30% includes benefits, pensions, allowances, and shares and that is a worry because these rewards are given much more generously to people in higher grades. So, when we look for inequality between two people being paid differently for doing the same job, or we run a ratio analysis that compares the average pay for a specific profile of employee to the average pay from all other employees… our comparisons are missing 30% of the data… a rather large error!

Unilever was not happy about that and funded the development of a technical solution. For just a few dollars a year per employee it collects all rewards, for all employees, in all countries, and puts it all in a single data source – and then updates it every day. Instead of a static, backward-facing picture, pay equity comes alive and can be given to managers at precisely the moment they make those thousands of individual decisions on pay, bonuses, hiring, and promotions that increase or reduce pay bias.

For organizations that genuinely care about pay equity and fairness, this is an easy win but sometimes, the discussions about doing this are not about “will it work?” or “what does it cost?”, they get bogged down with “do we really want to know?”. This happens when legal or compliance fear that accurate pay equity data could expose historical inequalities that nobody has noticed. “Isn’t that the point?”, I say. They say “… it’s safer not to know than face compensation claims”. The legal term for this - deliberately choosing to look the other way - is “Wilful Blindness”. And it doesn’t look good when the truth comes out in a hearing. “The defendant was paying people unequally and consciously chose not to find out?”, is not a question any company wants to face. If there is an easy way to confirm you are a fair payer and identify and eliminate gaps you should do it, not just to be fair to employees and compliant with your own policies but to protect your shareholders, because the reputational cost of consciously shutting your eyes and hiding is much greater than the cost of leveling up and living up to your duties to as a fair and equal payer.

Ken Charman - CEO of uFlexReward