WorldatWork has designated October as “Workplace Equity Month.” To shine the spotlight on issues of pay equity, diversity and inclusion, and social justice, Workspan Daily will be publishing various articles throughout the month on related topics. Visit our Workplace Equity page for more content on this critical area of total rewards.
Companies have been quick to adapt to the current business and talent challenges, but unfortunately the job and pay changes implemented may exacerbate their pay equity issues - which can also have a negative impact on fairness. Traditionally, most organizations have been concerned with paying competitively with the market and fairly among employees. However, with the efforts of environmental, social and governance (ESG) investors, increased government regulations, the #MeToo and Black Lives Matter movements, pay fairness is also connected to social responsibility.
The connection between fairness and social responsibility includes understanding what it means to provide employees with a living wage, evaluating the relationships between executive and employee pay, expanding the demographics included in your pay gap analysis, as well as considering how social and cultural norms can influence employees’ perception of fairness.
Beyond a Paycheck
The onset of the COVID-19 pandemic has changed the conversation about the living wage — the minimum income necessary for a worker to meet their basic needs such as food, housing and other necessities such as clothing — beyond just pay and now includes elements of the overall employee experience that should be offered to all employees, such as:
• Paid sick leave,
• Health insurance coverage,
• Retirement plan participation,
• Maternity/paternity leave,
• Childcare subsidies,
• Bereavement leave,
• Personal protective equipment and
• Stronger safety measures.
Many of our essential workers have limited wages and benefits. Yes, essential workers include doctors and nurses, who typically receive benefits, but most essential workers like grocery workers, warehouse workers, home health aides, orderlies, nursing assistants, farmworkers and delivery drivers do not. Furthermore, most essential workers are predominantly women and underrepresented minorities.
Fairness between executives and the average employee began with the CEO pay ratio but is now taking on a different perspective. During the pandemic, many organizations have implemented pay reductions and have included executives. About one in five companies surveyed by Willis Towers Watson either had or were planning to reduce executive salaries. However, that number is dwarfed in comparison to the four million private sector workers who have had pay cuts, according to the University of Chicago’s Becker Friedman Institute.
More than Gender
Additionally, pay gaps are no longer only about gender but also the importance of understanding other demographics including race and ethnicity. For example, California recently enacted a law requiring pay and time worked reporting on gender, race and ethnicity for the EEO-1 categories, starting in 2021.
And the good news is that companies and their boards are also taking notice, even without federal reporting requirements in place. During 2020 second quarter earnings calls, 40% of S&P 500 companies discussed diversity, equality and inclusion, which was up from 4% in 2020’s first quarter, as well as last year where only 6% of companies covered this topic, according to Royal Bank of Canada.
Meanwhile, in the United Kingdom, gender pay gap reporting became effective in 2018 and, while reporting pay gap statistics on race and ethnicity is not currently required, almost one quarter of UK businesses are voluntarily reporting their ethnicity statistics.
Finally, the definition of fairness varies across different markets and cultures, because many countries have different social mores and laws that impact women. In some parts of the world, it is illegal for women to participate in certain professions.
According to the World Bank Group, more than 50 countries currently have restrictive laws and regulations affecting a woman’s ability to earn equal pay for work, and her ability to work in the same sectors and industries as men. However, 12 countries have improved legislation affecting women’s pay since 2017. Examples include:
• The United Arab Emirates, which removed all restrictions on women’s employment.
• Thailand, which legally mandated equal pay for equal work.
• Iceland, which has become the first nation in the world to ban pay discrimination entirely.
Having a Diverse Perspective
There is a business case for gender equality, diversity and inclusion. McKinsey’s Women in the Workplace 2018 survey found that 21% of gender-diverse and 33% of ethnic-diverse companies are more likely to outperform their industry median. We know the culture of work is important for attracting and retaining talent.
Employees want to feel respected, and want to feel they have an equal opportunity to grow and advance. Employees care about opportunity and fairness, not only for themselves but for everyone. Simply put, they want the system to be fair. Organizations who consciously hire and promote more diverse candidates also create a strong organizational culture. These two things reinforce each other. When employees feel that their organization is fair and inclusive, women and underrepresented groups are happier and more likely to thrive. And by fostering this type of culture, organizations are able to make progress on closing pay gaps in woman and minorities.
It is important to understand how all of these perspectives work together and impact fairness in your organization. Fairness is about not only pay, but your organization’s broader total rewards offerings. You also need to consider any talent programs which influence pay opportunities.
Finally, fairness should be integrated into your inclusion and diversity strategy. Considering fairness from multiple angles ensures you include all elements that need to be addressed to effectively communicate your organization’s talent value proposition.
About the Author
Mariann Madden is a director, rewards at Willis Towers Watson.