Making Pay Equity Work for All

New Harvard Business Review Analytic Services study sponsored by UKG examines existing inequities, organizations’ priorities and why the time for change is now

A new study on pay equity in America sponsored by UKG and conducted by Harvard Business Review Analytic Services, reveals organizations are making progress when it comes to prioritizing equal pay among men, women, and underrepresented groups in the workplace. However, employers and employees have vastly different perceptions on how that is being achieved, and significant, systemic barriers remain when it comes to implementing long-lasting change.

The study, “Making Pay Equity Work for All,” compares responses from 453 company executives and 3,005 employees of all levels and examines strategies that separate pay equity leaders from others; the impact intersectionality has on the perception of pay equity progress; and how leadership, pay transparency, clear communication channels, and innovative technology tools can help organizations achieve lasting pay equity. This study is a cornerstone of the UKG Close the Gap Initiative, creating awareness and action regarding pay equity — one of the most enduring and unjust realities in the workplace.

“Equitable pay is a basic human right. It is fundamental to an individual’s sense of worth as well as their ability to care for themselves and others,” said Brian K. Reaves, chief belonging, diversity, and equity officer at UKG. “We are all born with equitable talent, but society has shown we lack equitable opportunity. For far too long, the pay scales have been tipped in favor of white men. This study shows now, more than ever, that organizations must recognize the importance of prioritizing equal pay in the workplace, disparities persist, and employers’ actions are not always enough or aligned with employees’ expectations.”

Employer, Employee Perceptions Differ Greatly When It Comes to Pay Equity

The report reveals 74% of executives consider pay equity a moderate or high strategic priority, and 71% of employees agree the issue is an important priority for their organizations. However, the similarities end there. Fewer than half of employees (41%) believe their employers have successfully achieved pay equity, and 26% say their organizations have been completely unsuccessful in ensuring equal pay for equal work. Furthermore, the survey shows 49% of companies do not have a well-established pay equity plan in place, and nearly a quarter (24%) of employees are not aware whether such plans exist within their organizations.

Lack of Transparency Fuels Culture of Silence

One of the reasons for the divergence of opinion is a lack of transparency. Forty-six percent of organizations admit they are not transparent in the area of pay equity, and 34% of employees say that silence is a major obstacle to implementing equal pay. With no insight into how their compensation compares with that of their colleagues, nearly a third (32%) of employees say they are unwilling to speak up or negotiate. Even worse, Black as well as Hispanic and Latinx employees (40% versus 28%) are twice as likely as white workers to remain silent, followed by 34% of Asian or Asian-American employees, impeding pay equity progress.

Top Contributors to Pay Disparities

Race plays a significant role in what employees view as disparities in pay equity. More than a third (35%) of Black employees attribute discrimination in opportunities for advancement as a major factor, followed by 26% of Asian Americans, and 20% of Hispanic and Latinx employees. Similarly, 32% of Black and 25% of Asian, Hispanic, and Latinx employees cite discrimination in salaries or hourly rates. And 32% of Asians, 31% of Hispanic and Latinx, and 27% of Black employees cite differences in salary negotiating abilities, compared with 25% of white workers.

Unequal Distribution of Pay Equity Efforts

Race isn’t the only factor when it comes to unequal distribution of pay equity efforts. Employers say the majority of their efforts are directed at women (59%), followed by people of color (55%), ethnic minorities (45%), members of the LGBTQ+ community (33%), and those with disabilities (23%). And when it comes to how effectively organizations have succeeded in establishing pay equity for all employee groups, 40% of white men believe their employers have accomplished this, compared with just 25% of women, 23% of Black women, 22% of Hispanic or Latinx men, and 16% of Asian women.

“What this data tells us is that pay inequity isn’t just limited to one specific attribute. It’s the intersectionality of all these things — race, gender, gender identity, sexual orientation, and more — that contributes to the persistence of unequal pay for equal work performed,” said Reaves. “Organizations and their leaders must commit to doing the hard work — putting in the time, effort, and resources to uncover where those biases exist, whether intentional or not — and take steps to correct the problem and do right by their people.”

Whose Responsibility Is It?

Where does the responsibility of pay equity lie? According to 47% of executives, the chief human resources executive (CHRO) is primarily responsible for enacting change. Thirty-nine percent believe it’s the responsibility of the chief executive officer (CEO), followed by a senior executive team member (32%), and only 8% believe it’s the responsibility of the chief diversity officer. Contrast that with a third of employees (37%) who feel the CEO should oversee pay equity initiatives, and 6% who believe it’s the responsibility of the CHRO.

“Change must start at the top, but it’s the responsibility of all leaders to work collaboratively to build an inclusive and equitable culture where all employees feel valued and have the opportunity to thrive,” said Pat Wadors, chief people officer at UKG. “HR has a particularly critical role in spearheading these efforts, but the rising role of the chief diversity officer presents immense opportunity to infuse diversity, equity, inclusion, and belonging into all aspects of an organization, and work in lockstep with HR to enact meaningful and long-lasting change.”

Strategies to Successfully Implement Pay Equity

Initiating change is challenging yet pivotal to establishing an effective pay equity plan. Dedicated leadership, auditing tools, a commitment to transparency, and clear communication are all foundational to the process, but technology presents a significant opportunity. Employee pulse surveys create an opportunity to collect ongoing, anonymous feedback to help organizations know how their people feel. Benchmarking lets leaders know where they stand in relation to other organizations, from a compensation perspective, and presents an opportunity for improvement. Business intelligence and analytics tools that rely on data also allow organizations to see where inequities exist, so they can ensure fairness throughout the employee lifecycle.

“Change is difficult and doesn’t happen overnight, but the time to act is now,” said Reaves. “As an organization whose purpose is people, we know that an individual’s income impacts every aspect of life, including their health, wellness, family, and future.”

Supporting Resources

• Read the full report, “Making Pay Equity Work for All.”

• Learn more about how UKG is making pay equity a priority.

• Access UKG pay equity resources and insights.

• Follow UKG on Facebook, Instagram, LinkedIn, Twitter, and YouTube.

About UKG

At UKG, our purpose is people. As strong believers in the power of culture and belonging as the secret to success, we champion great workplaces and build lifelong partnerships with our customers to show what’s possible when businesses invest in their people. Born from a historic merger that created one of the world’s leading HCM cloud companies, our Life-work Technology approach to HR, payroll, and workforce management solutions for all people helps more than 70,000 organizations around the globe and across every industry anticipate and adapt to their employees’ needs beyond just work. To learn more, visit ukg.com.

SURVEY METHODOLOGY

Business Survey

Harvard Business Review Analytic Services surveyed 453 members of the Harvard Business Review audience via an online survey fielded between April and May 2022. Respondents qualified to complete the survey if they were familiar with their organizations’ pay equity plans or efforts.

Consumer Survey

Harvard Business Review Analytic Services surveyed 3,005 full-time employee respondents (i.e., not senior or executive level) drawn from a third-party research panel. The study was conducted via an online survey fielded in May 2022.

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