Less than one-third of employees feel they are paid fairly, while just 34% of employees believe their pay is equitable. According to a recent survey by Gartner, Inc. of 3,523 employees in 2Q22, employees who perceive their pay as unequitable have a 15% lower intent to stay with their employer and are 13% less engaged at work than employees who perceive their pay as equitable.
Most organizations are actively taking steps to close pay gaps; a July 2022 Gartner survey found that 84% are conducting pay equity audits at least annually. While technical approaches are necessary, they don’t address employee perceptions.
Most employees’ perceptions around pay are attributable to general trust in the organization. Factors that erode organizational trust include poor culture and inclusivity, poor work-life harmonization and unfair experiences. To increase employee perceptions of pay, the authors suggest tha HR must rebuild employees’ trust in the organization.
“Employees’ sensitivity to perceived pay gaps is being exacerbated by today’s economic conditions, including rising inflation, and the hot labor market, which is causing a shift in compensation between tenured employees and new hires,” said Tony Guadagni, senior principal in the Gartner HR practice. “Employee perceptions of pay equity aren’t rooted in compensation. Instead, the main driver of perception is organizational trust – when employees don’t trust their employers, they don’t believe their pay is fair or equitable.”
According to Gartner’s July 2022 survey, 72% of total rewards leaders report that their organization’s senior leadership believes that pay equity is a high or very high priority. Yet, decision-makers deprioritize pay equity in practice, particularly when hiring critical talent.
“An ideal pay equity team consists of leaders and employees across levels, business units and functions with insight into the practices and processes that create pay equity gaps and a visible commitment to pay equity within the organization,” added Guadagni.