Pay Equity Audits and Transparency Foster Trust, SHRM Research Shows

Nearly 3 in 5 (58 percent) of U.S. organizations voluntarily conduct pay equity reviews to identify possible pay differences between employees performing similar work. Of those organizations, 83 percent adjusted employees' pay following a pay equity review, according to new survey data from the Society for Human Resource Management (SHRM).

The surveys, which received responses from 1,017 individual contributors, 1,038 managers and 1,094 HR professionals, were fielded in June and July.

"This research shows that workplace culture starts at the top—and organizations with forward-thinking leadership are in the best position to win the global competition for talent," said Emily M. Dickens, SHRM chief of staff, head of government affairs and corporate secretary.

SHRM encourages employers to proactively conduct self-evaluations of pay and correct improper disparities in compensation, to discuss pay expectations with their employees, and to share with their employees information on how pay decisions are made.

SHRM's new research includes these key findings:

• Asking for higher pay during job interviews. Women are more likely than men to say they asked for only 1 to 10 percent more than their current pay (50 percent versus 34 percent) during the job interview process, whereas men were more likely than women to say they asked for 11 percent or more (34 percent versus 20 percent).
  

• Colleagues discovering gender-based pay differences. Around 1 in 4 workers (23 percent) found out someone of a different gender at their organization was paid more than they were even though they performed the same job and had the same experience.
  

• Colleagues discovering race-based pay differences. Around 1 in 5 workers (19 percent) found out someone of a different race or ethnicity at their organization was paid more than they were despite having the same job and experience.
  

• Colleagues discussing their pay rates. About 1 in 5 workers (19 percent) who found out they were being paid less than a colleague of a different gender or race said they talked to other employees about the pay difference, and more than 1 in 4 (27 percent) started looking for a new job.
  

The survey also highlighted areas in which organizations can improve their efforts to ensure employees are paid fairly, as indicated in these research results:

• Tying pay to new hires' skills and credentials—and tracking that information. About nine in 10 (91 percent) of the organizations surveyed said they voluntarily offer higher starting pay to candidates who possess skills, qualifications or credentials above and beyond the minimum qualifications, but 20 percent of those organizations don't have a formal way of tracking information about those factors.
  

• Pay equity audits more common at large companies. Organizations with 5,000-plus employees are significantly more likely to conduct pay equity reviews than organizations with fewer than 100 employees (78 percent versus 48 percent).
  

• Pay equity audits more common at female-owned companies. Organizations with a female owner or CEO are more likely than those with a male owner or CEO to conduct pay equity reviews or audits (67 percent versus 55 percent).

"These findings demonstrate the path toward equity requires more directed education on the compensation process and increased engagement with people on the front lines of designing and implementing pay strategies—HR professionals," Dickens said. "At the same time, organizations should help build a deeper understanding of pay equity best practices among people managers."

Getting Transparent

Most employees (91 percent) who believe their organization is transparent about how pay decisions are made also said they trust that their organization pays people equally for equal work regardless of gender, race and ethnicity, SHRM's research found.

Conversely, only 49 percent of those who believe their organization lacks transparency when it comes to pay decisions trust that employees are being paid equally for equal work.

SHRM also found that less than half (47 percent) of HR professionals said their organization is transparent with employees about how pay decisions are made, but 94 percent think it is important for organizations to exhibit transparency.

"Pay transparency requires a company to reflect on how each of these factors play into salary considerations, which in turn can help uncover bias and lead to a more inclusive workplace," said Shelly Holt, chief people officer at Seattle-based PayScale, a compensation data and software firm. "It can be scary to HR leaders since salaries have long been treated as a taboo subject in the workplace, and the assumption is that open salaries will lead to resentment among employees."

Those concerns "don't reflect reality," Holt said. "Employees talk, and odds are they already know what their peers are making. They also have access to compensation data websites to help them determine how their salaries stack up to the market rate."

Employers are engaged in "a hypercompetitive environment for talent, and open platforms are increasing the level of pay information available to current employees and recruits," said Catherine Hartmann, North America rewards practice leader at consultancy Willis Towers Watson. "Employers that have yet to expand and become more transparent in their pay communication with employees will need to do so as top talent will demand it."