On its face, pay equity is simple and unobjectionable: equal pay for equal work. But that tends to be where the simplicity ends and the objections begin. The focus quickly shifts to the gender pay gap, which measures the difference between men’s and women’s earnings. Currently, it’s these gender-based differences that grab the most high profile headlines, from Jennifer Lawrence in Hollywood to Lisa Wilkinson in Australia.
While gender equality is rightfully getting a lot of attention, the reality is that inequality stretches well beyond gender. Gaps also exist in relation to other factors like ethnicity, social background, disability, sexuality, appearance and age.
Organisations around the globe are grappling with this issue with most developed nations now having some form of equal pay for equal work legislation on the books. Beyond the legal imperative, there are also financial gains to be made with a 2018 McKinsey report finding organisations in the top quartile for gender diversity at the executive level are 21% more likely to outperform the national industry median for financial performance. Looking at cultural/ethnic diversity, the likelihood is even greater at 33%.
However, many organisations still struggle to know how to start the process required to diagnose, quantify, and address pay gaps. We believe a robust approach to pay equity necessitates going back to basics and focusing on what constitutes equal work in your organisation, as only then can equal pay follow.
To achieve pay equity, you have to understand what ‘equal’ means
Obviously pay equity doesn’t require everyone to be paid the same amount. What it does require is that, as a starting point, jobs that are equally complex and contribute the same value to the organisation should be paid equally.
From this starting point, there may be legitimate reasons for differences in pay – like performance – as well as invalid reasons – like race and disability. But it’s difficult to examine whether differences are legal and justifiable without first ensuring that you’re comparing like with like.
Starting with job evaluation to identify the real value of work in your organisation, based on the size and shape of different jobs, makes this comparison possible. It provides the answer to the critical first question in any equity analysis: are the jobs we’re comparing truly equal?
Keep asking ‘why?’
Job evaluation isn’t the complete answer to the pay equity question, but it provides a robust foundation for each line of inquiry that comes next. To complete the picture, organisational, individual and pay-based factors must be layered on top of the evaluation. This is no simple task and the factors will vary within and between organisations.
As each layer is added, it’s important to ask why each of these factors is relevant to the ultimate pay decision. Often, the causes of pay equity issues are rooted in the organisation’s leadership focus, culture, reward, talent acquisition, talent management and performance management processes. Unconscious bias may have seeped into these structures over time, as can happen, for example, with assumptions made about older workers. These assumptions can, for example, mean opportunities to retrain are limited to younger workers who are earlier in their careers, while older workers are passed over.
Creating real, sustained change
The fact that inequality tends to be deep-rooted in an organisation means that a band-aid solution won’t cut it; a few isolated pay adjustments aren’t enough. Effecting real change means committing to fundamentally changing the structures within the business which have perpetuated pay inequality.
The KF EQUAL Process outlines our approach to measuring and closing gaps for sustainable change, addressing the complete talent supply chain:
Establish parameters: Understand the project scope, process and purpose, as well as the organisational, individual and reward-based variables that need to be defined and considered.
Quantify gaps: Determine whether and where gaps exist by running organisational data through Korn Ferry’s pay equity model.
Understand drivers: Identify the root cause of inequity by analysing the full talent supply chain.
Action planning: Evaluate options for closing gaps, create a recommended plan.
Lead change: Create and execute the implementation plan and measure results.
The solution to the gender pay gap is simple – equal pay for equal work – but the process for getting there is often hard. Take the first step towards sustainable change by asking how do we value work in our organisation?
Find out more about how job evaluation and the KF EQUAL approach can help your organisation achieve pay equity here.