For a long, employers have pondered over the importance of gender diversity and the extent to which organizations should strive to achieve the same.
Employees are expecting more from their employers. Over the last several years, we have seen a dramatic shift in the public consciousness towards social justice, transparency, and intolerance of inequity. The COVID-19 pandemic and resulting recession have only made these matters more urgent.
This situation is in the control of employees and constitutes an urgent call for pay equity. However, pay equity is not something businesses can do once and forget about or repeat on a sporadic basis. Every time workers join or leave a company, pay equity is threatened. Therefore, pay equity is something that needs to be baked into the culture of the organization, continuously monitored, and transparently communicated.
- Women are under-represented at all levels of the global.
- Eliminating the male and female employment & wage gap has real economic benefits.
- Underutilization of female talent is a critical business issue.
General thought process – There is no issue, so no action is needed. According to a recent Mercer survey, across sectors, the India Inc. diversity number stands at 26.8 % achievement against a target of 29.2 clearly indicating that a gender diversity ratio of 25% is no longer the benchmark.
Most of the compensation surveys also focus on benchmarking in terms of cash, variable, and benefits. Very recently organizations have started to discuss workplace flexibility due to remote working and hybrid models. Measuring the gender wage gap is still not in the mainstream and hence does not get the attention that it needs to.
Additionally, reporting and taking conscious action to bridge the gender wage gap is not yet mandatory in India unlike in some of the Western countries.
Today, women’s talent matters more than ever: women millennials, for example, are more highly educated and are entering the workforce in larger numbers than any of their previous generations. So, organizations cannot afford to miss out on this significant and growing talent pool. Building strong relationships with business partners is essential for HR to be able to advocate for pay equity.
Understanding Pay Equity
Pay equity does not mean that all employees with the same job title receive the same pay. It means to treat people according to their merits and the value they bring to the table. In other words, there are legitimate reasons for compensating some employees more than others based on differentials such as job responsibilities, years of experience, tenure at the organization, location, specialized skills, performance, and so on.
In the context of diversity, equity, and inclusion (DE&I), equity can mean giving some people a boost to receive equal opportunities, such as setting quotas for hiring and promoting women or people of color. This is to address disadvantages and level the playing field.
Although pay equity is often couched in the framework of closing the gender wage gap, pay equity is important for all employees.
Pay Equity – a Priority
Women suffered higher unemployment rates than men in the COVID-related recession. Indeed, women are unemployed in higher numbers than at any time in the past 33 years. This is because women occupy service-related jobs in higher numbers than men, many of whom were laid off. It is also because women are disproportionally expected to care for children and family members who are ill without being compensated for the need to take leave. During the pandemic, schools were shut down and many elders were in need of assistance from family. This reality has driven scores of women out of the workforce.
Research shows that unemployment results in lower pay when returning to work. This suggests that when women return to the workforce, they may incur a pay cut. Due to the high volume of women impacted, this reality could result in the gender wage gap actually widening rather than shrinking.
Also, in the past, DE&I initiatives were mostly taken for in-person work environments. However, if has become very important for fully remote or hybrid working environments to focus on this agenda due to the rising concerns, for example, who is “out of mind” when they are “out of sight”?
The solution to this challenge is pay equity and focused initiatives linked to hiring and retention in DE&I strategy. In other words, to prioritize merit-based pay across the organization over the cost advantages of temporarily hiring at lower rates in a depressed market. Although people who are unemployed are in less of a position to bargain, people who were laid off or took time off due to the pandemic should not be offered lower wages for working the same job as current employees. Skills do not depreciate that quickly and taking time off to care for family as a result of the pandemic should not be penalized.
Building a Culture of Pay Equity
Culture is built with every action taken by the company—intentionally or not. Compensation is absolutely a critical component of company culture, shaping the employer brand and the employee experience through the perception employees have around the fairness of their compensation and how it is determined.
In many Western countries, reporting and bridging the gender wage gap is mandated. Soon, it may be legislated in some of the developing countries as well. Before it is legislated, an organization can work towards baking pay equity into the culture of their business as an intrinsic aspect of their employer brand and also transparently communicate about the same to their employees and the broader industry about how pay equity is enforced. In the modern world, it is expected that organizations unleash the power of data and technology to enable continuous monitoring of pay equity.
Making a Business Case for Pay Equity
The good news is that organizations can change from being reactive to proactive. However, it does require commitment to do things differently as well as investment in people, processes, technology, and data to actually enact change.
Pay equity can be pitched as one of the key strategies when an organization has a strong commitment towards valuing its people, DE&I programs, or related corporate values. This enhances the ability to attract and retain talent in this highly competitive world where the business stands to lose a lot more money in turnover.
Also, when people are paid well and feel valued across the organization, they are less likely to be disengaged and more likely to work hard and take care of customers.
In one of the recent salary increase survey conducted by Aon India, they looked at how the current gender diversity ratios stacked up to targets set by firms across sectors. When these were correlated with their corresponding business performance in 2021, a clear positive trend emerged. The research suggests that organizations that meet or are close to meeting their diversity targets have better business performance than those that have a higher gap to target.
On average, the gap to target was less than 1% for organizations that show growth in FY2021 as compared to a 5.5% gap for those that show a decline in business performance over the same period while having similar diversity targets.
The talent that is available today in the market expects more flexibility and a dedicated focus on Diversity and Inclusion (D&I). The strategy towards D&I will communicate whether the organization plans to have an equitable culture in the workplace irrespective of gender, race, etc. A healthy D&I strategy means healthy and highly engaged employees.
In turn, the organization will be able to speak clearly and transparently about its pay practices, arm recruiters and managers with communications about the opportunity with the organization, and have the data to handle any dispute over unfair pay practices with ease.