Top 3 beliefs that drive pay inequities in organisations
Pay equity is receiving more attention these days not only because of ESG reporting but also because many countries are mandating regulations that require organisations to — post pay range in their job ads and disclose pay gap report for companies with more than X number of employees.
While organisations start to explore ways to comply, these are the 3 common misconceptions that are preventing leaders from bridging pay gap.
1. Pay gaps exist because different people bring different skills, qualification and experience to the table.
While the statement holds some truth about how different people bring different things to the table, which creates different outcomes… the basis for pay is potential and performance. There is scope for discrimination here because of the way employers judge the potential of an employee. There are several systemic mechanisms in place to somewhat fairly measure performance of employees. However, when it comes to potential, even though people who graduated from the same university, come with same number of years of experience and with same set of skills are assessed, they are indeed paid differently because of unfair perceptions about employees due to gender, race and ethnicity.
Examples of such discrimination include (but not limited to): Showing signs of empathy in leadership style means that individual is not strong, aggressive and outcome oriented; Working parent without childcare implies that they would not be productive in their job; Asians are usually not authoritative in the way they carry themselves, so they cannot be a better salesperson than non-asians and so on.
Organisations can address such disparities by determining pay that matches the skills needed for the roles. Job evaluation helps organisations understand what types of skills are required to do a job efficiently. This brings a skills based view of what it takes to perform a role without bringing the individual into the picture. Then based on those skills, market rates can be determined. Doing this exercise ensures that companies can avoid paying inconsistently for same value jobs.
2. Pay gaps exist because high performers bring better results than others, so it is fair that they get paid higher.
This is one of the common reasons that employees are told for drastic differences in pay. It is true that high performers need to be recognised for their higher performances but the fact that the same value jobs deserve same pay cannot be overlooked. For example, Anna Cheong and Pete Miller are both marketing consultants with 5 years of experience, who graduated from Singapore Management University (SMU) working out of Singapore. Pete already gets 20K higher base pay when compared to Anna and this year, he has received higher performance rating. The pay gap between the two ends up exceeding 50K in their base pay. The gap widens because companies rely on money as their only form of compensation & rewards strategy. Note that, if Anna and Pete were to have difference in years of experience or in their qualifications — that’s a different story.
Organisations can tackle this by defining a strategy that will motivate employees, retain talent and improve employee experience of the workforce. A robust compensation & reward strategy needs to standardise base pay for job roles, with properly defined salary structures and with — flexible components such as bonus that reflects performance rating (ex: higher performance rating means higher bonus, but the base pay remains fair and equal); and other recognition mechanisms such as additional day off, options to do 4-day work week, additional insurance coverage for family members, subscriptions to professional memberships, training and certification opportunities etc.
3. Gender pay gaps exist because women take longer childcare breaks.
This is the lamest excuse one can come across in an organisation where employee’s pay and progression opportunities are impacted badly because of parental leaves. Personal lives and the choices associated with it should not matter when companies design pay structures. When companies don’t factor in several things like — how minorities are not privvy to certain economic opportunities as they grow up, get educated, hang in certain social circles and so on… then why are personal choices like maternity break, childcare leave etc. taken into consideration when their performance is assessed?
Since the biggest aspect that needs to change here are people’s mindset, here’s where coaching comes into play. Anyone in a position to make decisions about employee performance that impacts their pay — need to have the self awareness which enables them to be fair and non-discriminatory.
People can be high performers even when they take long career breaks to look after their children & family. Being caretakers might mean they have different time boundaries but does not limit anyone’s ability to do their jobs. So, lesser pay because of that particular reason is just morally and ethically wrong and should be avoided when designing an organisation’s pay philosophy.
