In a perfect and fair world, workers would be compensated equally for the value of the work they do.

However, in spite of the evolution of the workforce over the past century, this isn’t always the case today. It was revealed earlier this year that women are only paid 90p for every £1 paid to their male counterparts. And that’s only when we’re looking at gender.

For employers who believe in fairness and inclusion in the workplace (and even for those focused solely on boosting the bottom line), the issue of pay equity is an elephant that can no longer be ignored.

Here’s why.

The threats posed by pay inequity

The Equality Act 2010 codifies the principle of pay equity into law – giving both men and women the right to equal pay for equal work.

However, we’re not quite there yet, and HR directors face a number of pay issues across multiple fronts – cutting across gender, age and class alike:

• The gender pay gap among employees stands at 8.3%, up from 7.7% last year

• There’s a big difference in the gender pay gap between employees aged over 40 years old and those under 40 years old

• Non-UK born ethnic minorities experience a 10.4% pay penalty simply for who they are

That’s not all: aside from being a clear ethical problem, there are several serious business repercussions to this.

If nothing else, pay inequity can lead to penalties or lawsuits. In fact, when gender pay gap cases are successful, the back pay agreement can tally up to hundreds of millions of pounds.

More alarmingly still, it can devastate your culture, retention efforts and reputation:

• 59% of businesses with a gender pay gap found that it was affecting their ability to attract talent

• 61% said it negatively impacting their staff retention

• Plus, recent scandals among respected companies like the BBC can result in social media backlashes, intense public scrutiny and even potential staff walkouts  

How to tackle pay inequity – effectively

Clearly then, pay inequity presents a serious challenge to your business’ integrity and longevity. So how do you stay on top of it and address the imbalance?

1. Conduct an in-depth pay audit

Make sure to look at the different demographics within your business and analyse the disparity (or lack of disparity) in the total package offered to different employees.

You should take into account a range of statistics like salary averages, salary changes and career path ratios between groups – ensuring you use the most up-to-date data available.

Need guidance here? Our teams at Innecto can offer year-on-year pay analysis, furlough evaluations, ethnicity gap calculations and much more.

2. Adjust salaries accordingly (and find out what went wrong)

Your findings should paint a clear picture of any pay inequity that exists. From here, you should seek to do the following:

• Tackle the inequity by reviewing and increasing salaries (your flexibility here is budget-dependent)
• Identify the factors that allowed this inequity to thrive (is it your hiring process? Oversight in your monitoring of employees’ development? Bias in your HR functions?)

To support you with this, we can provide detailed insights into the “invisible” reasons behind your pay gap outcomes – along with a prescriptive action plan to take control of the problem.

3. Introduce full pay, promotion and reward transparency

When employees have a clear grasp on what they should be paid for their roles and responsibilities, they’re empowered to challenge inequity.

Better still, it gives managers an effective and objective framework for making decisions about what employees truly deserve  – instead of gut reactions based on irrational preferences, prejudices and snap judgements.

And of course, when it comes to communicating your pay structures with staff, our easy-to-use platform is a great tool to have at your disposal.

4. Appoint diversity managers and taskforces

Fighting pay inequity is a full-time job. So you need a full-time team to stop it from rearing its head time and time again.

These teams can assess and improve your talent management processes, weed out biased recruitment and promotion decisions and gather a whole host of relevant data on the issue.

Conclusion: The fairer the pay, the stronger the company

In this article, we’ve covered the many challenges employers face when it comes to pay inequity and how to turn meaningfully the tide.

As a final note, just in case you need a motivation boost to start addressing this issue, here’s a reminder of the huge benefits that fair pay can have for your business.   

Employers that prioritise pay equity can reap some great results. They can see 13% higher engagement levels on average. They’re 26% more likely to improve the quality of their hires. They’re 42% more likely to see a year on year increase in their Glassdoor reviews. And they see better than average turnover benchmarks (54%) across the board.

The key takeaway? Striving for fair pay could be one of the smartest business decisions you make this year.

It’s easy to kick the pay equity can down the proverbial road. But eventually, the issue needs to be tackled head-on. That’s where a Personal Group Benefits Expert can help.