Pay Equity Issues Persist at Many Companies, HR Leaders Say

The corporate quest to achieve pay equity is not getting easier: 41% of human resources professionals say their organization is struggling to address pay equity, a 10% increase over the prior year.

According to Salary.com’s second annual Employer Pay Equity Pulse Survey the top three challenges are: getting leadership to support pay transparency, integrating their pay philosophy into their corporate culture, and learning how to conduct a pay equity analysis.

More than half of the companies participating in the survey say they have a process in place to address internal equity, and half have allocated resources to address identified pay disparities. The survey, conducted in December 2022, represents responses from more than U.S.-based HR professionals.

“The practical heart of any pay equity commitment is pay transparency,” said Garry Straker, vice president of compensation consulting at Salary.com. “It’s the key to managing an organization’s perception that there is equity in their pay practices.”

There is progress on wage transparency, with 51% of businesses reporting that they disclose wage ranges in job postings, a 45% year-over-year increase. Of the 49% that do not currently disclose wage ranges, more than half plan to do so within the next year. 

“New pay transparency legislation in California, Washington, and New York, among other areas, is creating a seismic shift in the practice of wage disclosure,” Straker said. “With many more states looking to build on what Colorado started in 2021, soon employers that do not proactively disclose wage ranges in job postings will be a small minority.”

Given that getting leadership support for pay transparency is the top challenge, it is not surprising that organizations making pay transparency integral to their corporate culture are in the minority. Only 36% of companies have established a pay philosophy that explicitly commits to pay transparency, on par with last year.

Increased transparency demands greater communication and understanding of pay practices between managers and employees. However, only one-third of respondents said that any manager at their organization could honestly and accurately answer “How is my pay determined?” when asked by an employee.

The inability to answer questions about pay is problematic, as current employees and job candidates rank as the top sources of pressure to get pay right. Sixty-three percent of companies say it is more difficult to hire new employees and 20 percent report that they are really struggling.

While one-third have a good handle on competitive pay and say it has helped their retention and hiring, half have the data but are still working to make the necessary adjustments. Thirteen percent say they need to get a better understanding of the compensation landscape.

“Last year we were curious to see how quickly companies would execute new pay strategies to meet heightened employee expectations,” Straker said. “One year later it appears that more companies are struggling and where progress has been made, much of it is in response to pay transparency legislation. Companies are going to have to do better if they hope to continue competing in what remains a very tight labor market.”

The survey was conducted in December 2022 by Salary.com. There were 919 employer responses from organizations across the US: 22% of respondents are executives; 23% are HR professionals; compensation professionals accounted for an additional 20%; 59% of respondents were from organizations with 500 employees or less.