Written by
Ruth Thomas
Senior Consultant and Co-Founder, CURO
LinkedIn

24 June 2021

When debating any employment issue today, it’s hard not to talk in terms of pre-and post-pandemic when the human cost of the crisis has been so significant. We are only starting to understand the true economic and social impact - with one bi-product being worsening pay inequality for many.  

Without doubt, pre-pandemic income inequality existed. In the UK, progress on earnings and inequality stagnated in the post-financial crisis years which led to an earnings squeeze - with average pay only returning to its pre-crisis peak in February 2020. Depressingly, CEOs out-earned the average worker by 117 times. Gender pay parity progress was woefully slow with April 2020 ONS data showing only a 0.3% reduction from the prior year for full-time workers, and UK legislation meant to address ethnicity pay equality had stalled.

Then the COVID-19 crisis struck, leading to the biggest change in working practices since World War II. During the initial response phase, collectivism thrived as we were united by a common sense of survival. Employees adapted to working remotely, willingly being redeployed into new roles, acquiring new skills and some even taking pay cuts. 

But early diagnosable outcomes indicate that although we were united by the feeling of ‘being in this together’, we were not necessarily all in this together equally. The IFS indicated that the lowest-earning 10% of workers were 7 times as likely as the highest earners to work in sectors that have closed, leaving low income workers greatly impacted. The recent WEF 2021 Global Gender Gap Report finds that it could take an entire generation to bridge the gender pay gap due to the COVID-19 pandemic. Racial and ethnic minority communities were also profoundly impacted by COVID-19, causing more deaths and substantial consequences on employment, access to education and livelihoods.

So at this transitional stage, as organizations assess what lessons can be learned amid much talk of ‘build back better’, prioritizing a fairer workplace for all needs to be an integral part of the ‘new normal’.  It’s crucial that we take action now, because the way that pay is distributed is evidently unfair and is failing businesses and society.

Here are a few actionable starting points for you and your team to take a look at: 

  1. Consider how all employees can share in success
  2. Practice looking through the lens of equality
  3. Aim for even greater pay transparency
  4. Include non-financial performance measures in reward schemes
  5. Review benefits offerings beyond cash compensation

 

Consider how all employees can share in success

When building new frameworks for managing human capital, it’s critical that we consider how all employees can share in success. This can be achieved by building on the feeling of collectivism that has emerged in the crisis and has led to a rise in employee engagement and productivity.

Practice looking through the lens of equality

It’s essential to keep equality top of mind when introducing new working arrangements and consider if every employee will benefit in the same way. For example, if you are adopting hybrid workforces, consider the following:

  • Track which employees opt to take which package and track whose pay gets reduced. 
  • Perform pay equity audits and identify vulnerable moments in the talent lifecycle where inequity occurs. 
  • Disaggregate data to understand the nuances and outcomes for different groups and detect gaps between policy and practice. 

In order to move beyond anecdotal evidence and subjectivity, employee data must be analyzed. Analyzing this data will allow any inequality to be properly measured and provide your organization the information it needs to take corrective actions.

 

Aim for even greater pay transparency

When pay policies are more complex and less transparent, they become more vulnerable to pay inequities. Yet, employers still feel uncomfortable disclosing pay frameworks. The reality is that if your processes are fair, you should have nothing to hide and the right pay framework should be easy to explain because it obviously aligns to how you attract, retain and reward talent. In the end, transparency breeds trust in both leadership and fair pay.

 

Include non-financial performance measures in reward schemes

Increase accountability by including some non-financial performance measures in updated review schemes, including indicators of diversity, equality and employee wellbeing.  Many organizations are arriving at the conclusion that individual pay for performance schemes are short term, resulting in increased interest in collective schemes where everyone shares in the success of the company.

 

Review benefits offerings beyond cash compensation

It’s important to recognize that traditional benefits programs underserve groups with different needs and circumstances, which is why reviewing benefits and wellbeing offerings in addition to cash compensation is vital, specifically benefits and offerings that became highly valued during the pandemic. Additionally, strive to evaluate the utilization of existing programs and revisit hierarchical benefit schemes for relevance. Some companies are actually deciding to flatten their reward structures so allowances and benefits are either for all employees or none.  

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To some extent, this value-led approach to pay fairness and transparency is being aligned against the emerging focus on stakeholder capitalism and the re-definition of business purpose with a mission to serve not only shareholders but also customers, suppliers, workers and communities. We do, however, need to ensure this re-definition is not just performative - but authentic and transformative.  

Now is our opportunity to limit escalating inequality and take personal responsibility for driving change. It’s uncomfortable to reflect that each of us in HR or as business leaders are culpable to some degree for unfair people and pay practices that exist today. We presided over the design of executive incentive schemes that have driven wage inequality as well as those zero hour employment arrangements that have undermined fair treatment. 

The transformational reforms necessary to achieve inclusiveness, equal economic opportunity and social justice typically take generations to morph. So let’s embrace the disruption the pandemic has caused and choose to accelerate outcomes today. 

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