Money

The Majority of CEOs Unaware That Their Organizations Lack Resources To Address Pay Equity

The pay equity conversation has changed dramatically in the last year. A movement that slowly gained momentum over decades sped up in 2022 when California, Washington and New York City passed landmark pay transparency legislation. Today, one in five U.S. workers live in a place where employers are legally required to share pay ranges. And 42 states have pay equity laws that go beyond federal requirements.

Whether it’s because of these laws or the demand from employees, boards and investors, more companies are prioritizing pay equity. In fact, new research spearheaded by my colleagues at OPEN Imperative and OpenComp—the State of Pay Equity 2023—found that nine in 10 executives say it’s important to address pay equity—up 18 percent from the previous year.

Despite this shift, there’s plenty of ground left to cover. Our survey found that 70 percent of teams don’t feel they’re set up with the right resources to make pay equity a reality, which is an increase of 24 percent annually; and the majority of CEOs (53 percent) still believe their companies are doing an excellent job addressing pay equity. This mismatch of intentions and actions illustrates the enormous complexity that sits on the shoulders of HR and people teams.

The key findings from this survey reveal not just how companies think about pay equity, but also the action they’re taking (or avoiding), and the common barriers that block progress.

Pay equity is now a business imperative

93 percent of employers at least somewhat agree that pay equity is important for recruiting and retention—up 26 percent since last year. More than half (54 percent) strongly agree—an 11 percent increase. And heads of people are 6 percent more likely to say it’s very important to address pay equity, which isn’t surprising because they are more likely to understand the high stakes involved. CEOs, listen to your HR and people leaders!

Pay transparency means something different to everyone

While laws are changing behavior, there is no one-size-fits-all approach to pay transparency. Since last year, 9 percent more employers use publicized pay ranges in job postings (47 percent); 11 percent more employers share pay ranges in interviews (43 percent); and 16 percent more employers share pay information with all employees (41 percent)—the biggest increase from 2022.

CEOs are overly optimistic about their pay equity performance

Overall, 46 percent of respondents say they do an excellent job at pay equity. While 53 percent of CEOs say they do an excellent job at pay equity, only 40 percent of HR leaders rank their performance as excellent. This shows that CEOs need to develop more curiosity to understand their companies’ weaknesses to make progress.

Most executives and HR teams need better resources to address wage gaps

As companies attempt to implement processes that support pay equity, they’re realizing what tools they need to make genuine progress. We found that 48 percent identify pay ranges and compensation philosophies as the most needed resources. Meanwhile, they rank the following as top five barriers to pay equity: compensation philosophy (16 percent); leadership buy-in (15 percent); money/funding (13 percent); poor access to quality compensation data (12 percent); limited staffing 10 percent.

There is reason for hope

Companies are self-assessing more often—96 percent audit and adjust pay at least annually, up 22 percent; 49 percent audit and adjust pay quarterly, up 21 percent.

But many companies still risk major fines

More than half (52 percent) of respondents are required to publish pay ranges in job postings. Of these, only 38 percent publish pay ranges in cities and states where it’s required. 35 percent believe not publishing pay ranges helps them sidestep wage increases. This false belief not only undercuts the intent of legislation, but it could also end up costing companies more in attrition, hiring and fines, which can total tens of thousands of dollars for a single violation. As seen in recent lawsuits, executives, board members and investors could all be held liable for not complying with new regulations.

What’s next?

Pay equity is a journey, and every step is different for every company. What’s important is to keep moving forward, without the expectation that you’ll be perfect at every stage. And don’t be afraid to uncover pay gaps or cracks in your compensation processes. Awareness of these issues can help you focus your efforts and resources for better results.

About the author

Emily Sweet

Emily Sweet is the VP of social impact and OPEN Imperative Lead at OpenComp. A board member of the National Council of Jewish Women, Emily is a veteran philanthropic leader and policy advisor with more than 20 years of experience advancing bold solutions to big problems that drive impact and inspire collective action.

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