The Hidden Costs Of Pay Inequity

It is not without reason that it is said ‘what gets measured gets done’. When measuring pay inequity is not even on the radar of an organisation, the chances of getting it right are very remote, hence the vicious cycle continues until it becomes a legal mandate


‘Equal pay for equal work’ is the essence of pay equity. More often than not, conversations around pay equity are generally focused on the differences that exist in pay between the two genders – male and female. Pay equity can be further sliced to include people from other marginalised communities like LGBTQIA, people with disabilities (PWDs) and people with intersectional identities.

Several countries have mandated the declaration of the pay equity data in the annual report of the company. This has led to transparency and open conversations around pay equity which was earlier hardly ever discussed.

Unfortunately, until pay equity is mandated by law, several companies will continue to get overwhelmed by the enormity of the exercise and the cost implications. The sad reality is that companies will be action-oriented on this front only when it becomes a compliance issue (remember the POSH compliance?). In the meanwhile, the company may not even be cognizant of the fact that it is running a business risk by ignoring the pay inequity in the organisation. Women or other marginalised groups will keep voting with their feet and join competition where they are paid for their worth. And along with them, the organisational intelligence is lost forever to competition.

Why does pay inequity exist in the first place?

The corporate world has not moved very forward from the male-influenced command-and- control set-ups where the contributions of men were given more importance to that of women. Men as the early entrants to the workforce had the prime mover advantage and ended up getting paid more than the women. The assumption that men are the providers and women are not, has also contributed to the inequity, and over the years the problem has been compounding and widening the gender pay inequity. This has become a way of life where there is no concerted attempt to set right the wrongs.

The other reason that has been attributed to gender pay inequity is the difference in the negotiation styles of men and women. Most men are known to be very comfortable asking for what they deserve while most women have always hesitated to push the envelope when it comes to salary negotiation. Men look at negotiation as a competitive sport while women tend to look at it from a consensus-collaboration-relationship standpoint. They are considered to be great negotiators when it comes to negotiating for their team or for a cause. This also has an impact on their entry-level salary when they first take up a job unless the organisation is mindful and offers the same starting salary irrespective of the negotiation skills of the candidates.

Gender-based stereotyping is another critical reason for the pay inequity. Despite the commitment and brilliance displayed by women in the workplace, they still carry the heavy backpack of being diminished when it comes to salary increases and promotions. And why so? Their commitment to a long-term career is always under the scanner. Will she relocate? Will she take on stretch assignments considering she has caregiving responsibilities? Can she handle this difficult client? Can she put in long hours? All these assumptions are being made with the best of intentions, but without getting her point of view.

Motherhood penalty is another reason for the pay inequity. When women go on maternity leave and if the salary increase cycle happens to coincide with the maternity leave, there are strong chances that the woman is overlooked for the salary increase and maybe even a promotion. And if the woman decides to take a career break to focus on child-rearing, she again ends up paying a penalty by starting off at a lower salary.

Women tend to rate themselves lower in their performance appraisals. There has been enough research that shows the difference between the way men rate themselves and the way women do. If the appraising manager is not gender intelligent, then they may not pay attention to correcting the same. To lift the woman up to the level she deserves to be at. The performance rating is a critical factor in almost all organisations when it comes to the percentage of salary increase, bonus payout and promotion.

It is not without reason that it is said ‘what gets measured gets done’. When measuring pay inequity is not even on the radar of an organisation, the chances of getting it right are very remote. And the vicious cycle continues until it becomes a legal mandate.

What can organisations do to reduce the pay inequity?

  • Commissioning a pay equity study for the organisation to identify any pockets of concern. This should be done without a legal mandate or a compliance requirement.
  • Share the pay equity results with the employees with honesty and transparency with a commitment to correct the inequities over a certain period of time. Communicate that it may take some time to fix the issue.
  • Set aside the budget for salary corrections wherever needed.
  • Create an inclusive culture where all employees are valued for their skills and competencies irrespective of their identities. This will address the identity-based stereotyping which can lead to pay inequity.
  • With all conditions being the same, offers of employment should be the same for all selected candidates for the same role and position.
  • Progressive organisations are paying for what the worth of the role is as against the previously drawn CTC of the candidate. This requires a paradigm shift in the minds of the organisations.
  • Train all people managers in conducting gender-intelligent performance reviews to ensure that women are rated appropriately.

The good news is that progressive organisations across the world are committing themselves to the long haul to reduce gender pay inequities by being intentional in their efforts. They are commissioning pay equity reviews to identify any gaps and working hard to rectify the same. This also provides an opportunity for organisations to understand the root cause of the anomalies and work on addressing systemic issues if any. Equitable pay practices will ensure that all employees feel valued and rewarded fairly which leads to a positive employee experience and a strong sense of affinity to the organization and its values.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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