Making Pay Equity Work for All

Coworkers celebrate pay equity in the workplace

When UKG first announced the Close the Gap Initiative to make a difference in the fight for pay equity, I was frequently asked: “Isn’t pay discrimination illegal?” and “Do pay gaps really still exist?” 

The answer to both questions is yes. 

As further proof, a just-released study about pay equity sponsored by UKG and conducted by Harvard Business Review Analytic Services confirms it. The report goes one step further by stating “…achieving pay equity is no longer solely a matter of eliminating sex discrimination but it’s an intersectional issue that cuts across race, color, and sexual orientation and requires a deeper examination of varying perspectives and a more granular look at pay data.”1

In my experience leading belonging, diversity, equity, and inclusion in organizations, this news isn’t new. Pay equity is not just a compensation problem. It encompasses the ecosystem of equity: representation, opportunity, and well-being. Failing to address the ecosystem ignores the systemic reasons about why pay equity occurs in the first place. It’s also one of the reasons that solving the pay equity problem is incredibly complicated. 

We agree there’s a problem. Now what?
 

One of the report’s findings that stood out to me is 74% of executives surveyed believe that the topic of pay equity is of moderate to high importance in their companies, but only 49% said their companies have a pay equity plan in place. 

Employees agree, with 71% of those surveyed saying that pay equity is an important topic in their company. But here’s the reality—38% say that their company does not have a pay equity plan in place and 24% said they didn’t know if a plan exists at all. 

The reasons employees give for why they think pay inequities still exist differ by groups but are more than just a gender issue. This issue compounds for intersectional employees. 

  • 35% of Black/African Americans said pay inequity was the result of discrimination preventing them from getting opportunities for advancement. 
  • 32% of Asian/Asian Americans and 31% of Hispanic/Latinx respondents said their salary negotiating abilities are what’s holding them back. 
  • 18% of White employees said they experience discrimination and 24% said they feel their salary negotiating skills are what’s preventing them from advancement.

Historically, companies have focused their pay equity programs on women. Study data confirms this is still true but finds that employers are opening up and starting to focus more broadly on the intersections of race, gender, and sexual orientation and their impact on pay.  

Researchers talked to executives from leading companies—defined as those with well-established pay equity plans in place and high levels of success to back it up—and learned that leaders easily score between 6 and 10 percentage points higher than all other employers when asked about the groups their pay equity efforts target, as shown in the figure below.  

Unequal Distribution of Pay Equity Efforts

 

Who’s in charge of solving the pay equity problem?
 

Well, that depends on who’s answering the question.

Employers said the chief human resources officer (CHRO) (47%) is responsible for solving pay equity, followed by the CEO, and the senior executive team.

Employees, on the other hand, tend to attribute successful business initiatives to the CEO. So, it’s no surprise that 37% want the CEO to be front and center. Also, no surprise: only 6% said the CHRO should head up the effort, which further confirms the idea that HR isn’t viewed as a change agent.

Realistically, though, business imperatives like pay equity need to start at the top, with the CEO and executive teams making a clear commitment to it. It then becomes the responsibility of all leaders to work collaboratively to build an inclusive and equitable plan. HR plays a critical role in spearheading pay equity efforts, and, I suggest, that HR can use this opportunity to rebrand itself internally as a partner for positive change. 

Business imperatives like pay equity need to start at the top, with the CEO and executive teams making a clear commitment to it.

 

–Brian K. Reaves

I’d be remiss if I didn’t mention the role of the chief diversity officer in this process. They can infuse diversity, equity, inclusion, and belonging into all aspects of an organization—the equity ecosystem—and work in lockstep with HR to enact long-lasting change.

The report puts forth several ideas backed up with real-world examples about the actions companies should take once a pay equity plan is ready to be put in place. Ideas include providing compensation training for both managers and employees and leaning into the power of open communication and transparency. 

As my colleague and friend, Melissa Thomas-Hunt, Distinguished Professor at the University of Virginia’s Batten and Darden Schools and UKG board member, said during a recent interview about the report, “It’s not enough to just do the right thing. You’ve got to tell employees what’s been done. This is a great conversation to have with employees, so they can hold leaders and managers with compensation responsibility accountable for making sure the closed gap doesn’t open again.” 

The hard truth
 

The data in this report tells us that pay inequity isn’t limited to one specific attribute. It’s about the intersectionality of all these things—race, gender, gender identity, sexual orientation, and more—that contributes to the persistence of unequal pay for equal work performed. 

Organizations and their leaders must commit to doing the hard work—putting in the time, effort, and resources to uncover where biases exist, whether intentional or not—and take steps to correct problems. Change like this is difficult and doesn’t happen overnight, but there is no better time than now to secure a better future for your employees. 

To learn more and hear from Brian directly, sign up for the webinar “How to Make Pay Equity Work for All” on Tuesday, November, 15.

 

Background
 

The study, “Making Pay Equity Work for All,” compares responses from 453 company executives and 3,005 employees of all levels and examines strategies that separate pay equity leaders from others; the impact intersectionality has on the perception of pay equity progress; and how leadership, pay transparency, clear communication channels, and innovative technology tools can help organizations achieve lasting pay equity. This study is a cornerstone of the UKG Close the Gap Initiative, creating awareness and action regarding pay equity—one of the most enduring and unjust realities in the workplace. 

Survey Methodology
 

Business Survey 
Harvard Business Review Analytic Services surveyed 453 members of the Harvard Business Review audience via an online survey fielded between April and May 2022. Respondents qualified to complete the survey if they were familiar with their organizations’ pay equity plans or efforts. 

Consumer Survey 
Harvard Business Review Analytic Services surveyed 3,005 full-time employee respondents (i.e., not senior or executive level) drawn from a third-party research panel. The study was conducted via an online survey fielded in May 2022. 

1Source: Harvard Business Review Analytic Services survey, “Making Pay Equity Work For All,” May 2022.