1 in 3 Employers Don’t Have a Pay Equity Strategy

In light of heightened employee expectations and new laws requiring salary disclosures, calls for pay equity have never been louder. A new report indicates that while a majority of employers are working toward pay equity, there is still work to be done.

Nearly three-quarters of employers (70%) said they have analyzed their compensation strategies and shared existing gender pay gap statistics with employees and/or external stakeholders, according to new data from compensation firm beqom.

That has led to a number of problems being uncovered, according to beqom’s survey of 875 salary and compensation decision-makers in the U.S. and the U.K., including wage discrimination (cited by 64% of respondents), promotion disparities (57%), below-market salary ranges (54%), pay compression (53%), and gender pay gaps (48%).

In response to some of the pay problems they’ve uncovered, most companies have reported taking steps to close existing wage gaps and foster transparency, the beqom report found.

Those strategies include listing salary ranges within new job descriptions (81%), increasing salaries due to inflation and economic standard-of-living costs (68%), implementing a process for continuous feedback (67%), increasing pay to correct existing pay gaps and salary inconsistencies (65%), providing clear structure for bonuses and performance review processes (65%), and increasing salaries based on performance (65%).

The report finds that “employers are making meaningful progress and taking action,” said Tanya Jansen, co-founder and chief marketing officer of beqom, but it also uncovers a big gap: About 1 in 3 employers (34%) still don’t have a pay equity strategy in place.

[See SHRM Toolkit: Managing Pay Equity]

Some Employers Struggling with Developing Strategy

Perhaps even more surprising, more than half of the compensation decision-makers surveyed by beqom said they doubt their company complies with global standards, and 45% said their approach to pay equity is hurting their ability to attract talent.

Compliance complexities are another matter. Just 2 in 5 employers (41%) said they are aware of global pay equity standards.

The data is evidence that employers are grappling with addressing wage discrepancies and promoting fair compensation, even when they know they should be doing more, Jansen said. “They understand the urgency in confronting wage gaps but find themselves navigating a complex web of regulatory requirements and stakeholder demands,” she said.

Numerous states now have laws requiring some kind of pay transparency, such as including pay ranges in job postings.

Part of the reason why some employers don’t have a pay equity strategy is because of those complexities and variations in standards. Meanwhile, smaller firms specifically may face difficulties because they often lack the necessary resources and expertise to address the topic, said Jeremy Feinstein, managing director at Empsight, a New York City-based human resource consulting firm specializing in compensation.

Jesse Meschuk, a Los Angeles-based human capital advisor and HR expert specializing in compensation, said figuring out a pay equity strategy can be “tricky.”

“What to disclose, how to get managers and employees ready—these are all actions that take careful planning and communication,” he said.

But not having a strategy in place proves to be problematic, experts said.

“Companies without a pay equity strategy are exposed to significant risks, including legal repercussions, challenges in attracting and retaining talent, and a weakened employer value proposition,” Feinstein said.

“The one-third who don’t have a strategy in place need to do so, and do so soon,” Meschuk said. “Regulations are increasing across the U.S.”

Wage Discrimination, Gender Pay Gap

The findings from beqom follow a report from Payscale earlier this year, which found that the U.S. gender pay gap for 2024 remains the same as last year, with women earning just 83 cents for every dollar earned by men. The gap is even worse for women who work remotely (79 cents) compared to women who work in person (89 cents). It’s also worse for working mothers, with the report finding that working mothers make 75 cents for every dollar a working father earns, while women and men without children have a pay gap of 88 cents.

Since 2019, the uncontrolled gender pay gap has narrowed by 5 cents for Black women and Native American and Alaska Native women, as well as by 4 cents for Hispanic women and Native Hawaiian and other Pacific Islander women, Payscale found.

While that movement is helpful, it’s not especially encouraging overall, said Ruth Thomas, pay equity strategist at Payscale, earlier this year.

“The only small sign of progress is pay gaps for women of color are closing more rapidly than pay gaps overall, but this is partially because these pay gaps are wider to begin with,” she said. The data implies the need for “legislators and employers to take action to break this cycle of stalled pay gaps and speed up the historically slow progress toward gender equality.”

Getting a Pay Equity Strategy in Place

To establish a robust pay equity strategy, Feinstein recommended that employers first examine their job architecture framework. This involves ensuring that employees are correctly classified within the organization through clearly defined job families, sub-families, and individual roles within them, combined with a comprehensive grading/leveling strategy, he said.

Meschuk said organizations should “gather all the relevant information you will need— job levels, salary ranges, individual employee profiles/experience, performance evaluation histories, promotion data, and actual compensation information.

“If some of this does not yet exist, it may make sense to do some initial work to best position yourself for a robust analysis—put in place a rudimentary job leveling/evaluation system so you can compare like jobs across departments and ensure you have a sufficient number of data points.”