Employer, Employee Perceptions of Pay Equity Differ Greatly

Organizations are making progress when it comes to providing equal pay among men, women and underrepresented groups in the workplace. Yet employers and employees have vastly different perceptions on how that is being achieved, and also differ on whether the CHRO, CEO or another member of the executive team should lead the pay equity effort, new research shows.

The research was sponsored by UKG, a provider of HR, payroll and workforce management technology and services, and conducted by Harvard Business Review (HBR) Analytic Services in April and May 2022. HBR Analytic Services surveyed 453 business executives from among Harvard Business Review subscribers who said they were familiar with their organization's pay equity plans or efforts, and also surveyed 3,005 full-time employees—excluding senior- or executive-level—drawn from a third-party research panel.

The findings were presented in a September research report, Making Pay Equity Work for All.
The report reveals 74 percent of executives consider pay equity a moderate or high strategic priority and 71 percent of employees agree the issue is an important priority for their organizations.

However, the similarities end there: Fewer than half of employees (41 percent) believe their employers have successfully achieved pay equity, and a quarter (26 percent) say their organizations have been completely unsuccessful in ensuring equal pay for equal work.

Whose Responsibility Is It?

A plurality of executives (47 percent) say the CHRO is primarily responsible for enacting changes to ensure pay is equitable at their organization, but just 6 percent of employees believe these initiatives should be led by the CHRO. Instead, the largest number of employees (37 percent) said the CEO should primarily be responsible for ensuring pay equity.

"It's clear that employees are keen to see the CEO take the primary leadership role with pay equity," said Brian Reaves, Austin, Texas-based chief belonging, diversity and equity officer at UKG. "Employees want to know that pay equity is a core business imperative, and like all other business imperatives, they expect to see the CEO take on a major leadership position."

As with other business priorities, he noted, CEO involvement brings a certain level of commitment, "signaling that correcting pay inequity on a systemic level is central to the future success of the organization. 

That isn't to say that other executives should not be involved in executing the strategy," he added, "but a clear communication and leadership strategy around the organization's top-down approach is essential to cultivating a successful pay equity initiative."

Success of Equity Efforts

Employers say the majority of their efforts around pay equity are directed toward:

• Women (59 percent).
• People of color (55 percent).
• Ethnic minorities (45 percent).
• Members of the LGBTQ community (33 percent).
• People with disabilities (23 percent).

When it comes to how effectively organizations have succeeded in establishing pay equity for all employee groups, 40 percent of white men believe their employers have accomplished this, compared with just 25 percent of women overall, 23 percent of Black women, 22 percent of Hispanic men and 16 percent of Asian women.

Given the divide between the views of white men and those of women and racial minorities over how effectively organizations have succeeded in establishing pay equity for all employee groups, what are white men not seeing?

"In reality, there is an equity ecosystem that contributes to a person's experience at work and impacts their perception on whether or not they or others are treated equitably," Reaves said.

In addition to pay, he described the different factors of the "equity ecosystem" as opportunity, representation and well-being.

"Each of those equities requires both quantitative and qualitative data to determine the root cause and ultimate solutions for correcting the perceptions and experiences that are not equitable," he noted. "Quantitative data can uncover systemic disparities like pay and the outcome of performance reviews for certain groups. However, there is also a qualitative facet to the lived experiences of different groups, and that's where we see this perception gap in overall equity taking shape."

Importance of Equity Audits

Cleveland-based Kelley Barnett, a labor and employment attorney for AmTrust Financial Services, advises businesses to "conduct a voluntary pay audit to identify pay disparities, particularly those businesses operating in states with pay transparency laws that will require businesses to publicly disclose pay information."

While the process can be intense and time-consuming, she noted, "when done correctly, conducting an audit will help companies identify troubling pay practices, remedy gaps, and may provide safe harbor protections in some states."

Barnett offered a word of caution, though: "To minimize the risk of unwanted disclosure of audit results, businesses should work with legal counsel so that the process is protected by the attorney-client privilege. Further, businesses should be ready, willing and able to act on the results. There's no faster way to walk into a costly lawsuit than to conduct a pay audit and then sweep the results under the rug."