As the new year begins, employers return to work highly motivated to start the year strong and achieve their 2024 goals, with many noting compensation as their top priority. Pay equity has become a critical issue in the workplace, with many employees calling for greater transparency and fairness in compensation. Failing to address pay equity concerns can result in serious consequences, including legal action, damage to your company’s reputation, and a loss of employee trust.
Pay inequity is often unintentional and a common trap for employers. Here’s what you need to know to avoid it in 2024:
- Pay equity refers to compensating employees the same when they perform the same or similar job duties.
- Most inequity in pay is not conscious or intentional. As the labor market rises, new employees often are hired at similar or higher rates than current employees. Equity then becomes off balance and creates wage compression.
- Wage compression occurs when the pay of one or more employees is very close to the pay of more experienced employees in the same job. Therefore, wage compression typically impacts the most tenured employees.
- An equity review is recommended at least once a year when assessing job positioning towards market, and whenever an offer of employment is made. When a new employee is being hired, it is highly encouraged that salaries for all incumbents with the same position are evaluated to ensure the offer is equitable.
By prioritizing pay equity compliance, employers can promote a more equitable and inclusive workplace culture, improve retention rates, and potentially avoid costly legal disputes.
If equity or market adjustments are needed, they can be done at one point in time, or spread out over time. Determine the highest level of need for adjustment based on essential positions, competitiveness in the market, turnover and retention risks. It is highly recommended to adjust those impacted using the same methodology for equitable adjustments.
Written by HR Compensation Advisor & Business Partner.