Why it’s time to lean into the water cooler chat about pay disparities

It may come as no surprise that there is a disconnect between employees and senior leadership when it comes to pay. 

But, in today’s world, it would suit employers well to lean-in to the talk around the water cooler. 

While these informal conversations among co-workers and friends historically have shied away from topics like pay and policy, the latest in global pay transparency laws have lifted the veil on yet another dimension of inequity. 

We can’t ignore the numbers

In our recent study conducted in partnership with Executive Networks earlier this year, half of the nearly 1,200 employees, HR leaders, and cross-function business leaders (50%) strongly agreed or agreed that pay inequities still exist at their companies. Meanwhile, less than one in three disagreed (32%).

At one point in time, it may have been easy to dismiss the water-cooler rhetoric as simply workplace gossip or a disgruntled employee venting to peers when things haven’t gone their way. But numbers don’t lie. 

Time to take a long, hard look

When leaders and employees alike identify inequities, we must take a hard look at organisational priorities and understand that the very foundation of a business lies among its people. 

As organisations look towards the future, given the current economic backdrop, it is not hard to understand why leaders must scale back business practices deemed non-essential. 

Pay equity analyses must not be one of them.

While leaders themselves claim pay equity and transparency are a priority at their companies, employees just don’t see it – almost three-quarters (73%) of senior leaders say it is a priority at their organisation, but only 37% of employees agree

Equity, transparency and the disconnect 

Six years on from gender pay gap reporting becoming mandatory for UK businesses with over 250 employees, pay equity and transparency remain seemingly out of reach for employees. 

While leaders themselves claim pay equity and transparency are a priority at their companies, employees just don’t see it – almost three-quarters (73%) of senior leaders say it is a priority at their organisation, but only 37% of employees agree.

On paper, HR and business leaders cite employee expectation as the main driver of pay transparency in their organisations. More than half (52%) of the respondents of the same study said this, ranking employee expectations higher than compliance and executive pressures.

With global law in place for decades ensuring equal pay and protection against retaliation for discussing pay, and employers claiming meeting employees’ expectations is their top priority, it begs the question – why is there such a disconnect? 

The answer, one may speculate, lies in what we could call the feedback loop.

When it comes to ownership of pay equity analyses and process implementation, senior HR leaders and business leaders don’t agree, setting the tone of misalignment from the top

Inside the feedback loop

For context, one of the greatest pitfalls we see in project management is developing a product from start to finish, without stopping to ask for feedback from the users. 

Pay policies are the product, employees are the users. More broadly, the same principles of an agile project management plan: user testing, feedback, agility, and iteration, can be considered here.

Applying pay, policies, and benefits for what we think employees want, without listening to the individualised needs of employees themselves, without regular review and iteration, results in the disconnect studies keep citing.

Prioritising pay progress

Like any business priority, a clear owner is critical to hold ourselves accountable for progress. But, when it comes to ownership of pay equity analyses and process implementation, senior HR leaders and business leaders don’t agree, setting the tone of misalignment from the top. 

Nearly half of business leaders are looking to the CEO to own pay equity, while HR leaders themselves are divided among the CEO, Head of Diversity, Equity, and Inclusion (DEI), and Chief HR Officer (CHRO). 

Regardless of the disconnect we see in ownership, votes for the most senior roles in the organisation are a clear indication of just how critical efforts towards achieving and sustaining pay equity are.

White women in the US earn 83 cents for every dollar a white man makes, 58 cents for Hispanic or Latina women, and 63 cents for black women

Pay equity is not one and done

Given the weight of importance all leaders agree to, the frequency of analyses leaves much to be desired. Just one in 10 (10%) senior leaders review their data monthly and rather concerningly, nearly a third (32%) only carry out audits once a year.

Pay equity must not be treated as a one-and-done exercise. One hire or employee exit has the ability to impact the pay dynamics of the entire organisation. 

Applying the same principles of agile project management, increasing the frequency of analyses will allow leaders to assess the efficacy of the policies and practices put in place to combat inequity. 

Perception and pay gaps

Infrequent analyses may be a fundamental contributor to the differences in perception of pay equity across the organisation. 

When we consider the individualised needs of our diverse workplaces, the perception gap widens across underrepresented groups. 

Perhaps, not surprisingly, the perception gap overwhelmingly mirrors the pay gaps we see across global workforces.

White women in the US earn 83 cents for every dollar a white man makes, 58 cents for Hispanic or Latina women, and 63 cents for black women. In turn, 61% of women said they do not have a great understanding of how pay is determined in their organisations, compared to 77% of male counterparts. 

The difference in perception also varies greatly across generations, four of which are present in today’s global workforces, for the first time ever.

Reduced productivity, barriers of talent attraction and retention, risk of widening gender and racial pay gaps stand as a top consequence of inequity for leaders

What this means for the future of work

The data shows us the difference in perception between employees and employers when it comes to pay, as well as underscoring the disparity among underrepresented groups. 

Correcting pay disparity remains much more than just the right thing to do, it is business critical. 

The one area where perception seems to align are the consequences of pay inequity. Reduced productivity, barriers of talent attraction and retention, risk of widening gender and racial pay gaps stand as a top consequence of inequity for leaders.

If the future of work introduces anything, it is the risk of widening gaps as challenges continue to evolve. 

Reduced productivity, difficulties attaining and maintaining talent, litigation, brand reputation, are just few of the many implications pay inequity has on a company’s bottom line. 

Whether we cite economic, legal, or social challenges, the data asserts there is one thing we must all agree on. Differences in perception and priority stand in the way of a fair and equal future, and the time to act is now.