Compensation Bias — How to overcome the organisational pay gap?

How an organisation manages compensation has a direct impact on the culture of an organisation. It is a hygiene factor that can create a healthy culture in an organisation or vice versa.

Most of the time, an organisation don’t pay attention enough. They do not even realise it is a topic of culture or treats it as an individual negotiation factor to retain the resource.

A recent survey from Willis Towers Watson discovers that organisations encounter increasing urgency to upgrade pay-for-performance approaches to ensure fair practices in their compensation systems. There are some areas they are explicitly targeting to improve:

• 42% are conducting a gender pay or pay equity diagnostic
• 44% are planning to reevaluate recruitment and promotion processes
• 33% are developing communication of strategies to promote an inclusive culture

The question to reflect:

1. In your career trajectory, how many times we worried about our salary?
2. How many times did you think that we deserve more than what we get?

Now take a pause and think again:

1. How many time were we happy with our salary for the longest time?
2. How many times were we paid in a way that salary was never a point of concern?
3. How many times did we get salaries beyond your expectations in your job offer?

How employers are paying their employees? Is it enough so that it stops mattering to the employees. Despite intentionally, there is a considerable gap in the salaries depending on certain factors which may not objectively justify. Now how to prevent a massive hole in an organisation’s compensation structure in a discriminatory manner. For that, we need to focus on two areas of an employee life cycle.

Have a proper mechanism to define salaries at the time of hiring resources:

• Do not ask for the past salary details if they are coming from a different country/continent if there is a considerable gap in the economy of these two countries.
• Ignore the emotion of distrust on the employee if they belong to any marginalised group: industry experience, education, geography, culture, nationality, age, gender etc. The more unstructured the hiring process is, the more it will take more subjectively and judge potential to create an unjust compensation culture.
• Pay based on the role the hire will play in the organisation, but not what they got in previous organisation
• The hiring decision-making process: Have a structured recruitment process that eventually helps to take an objective hiring decision. Focus on the competencies the resource will bring in, but not likability towards the personality.

Conduct an out-and-out salary review for the entire organisation:

• Build a transparent pay parity structure within the organisation
• Conduct a salary audit once a year to eliminate compensation bias, and while doing it, analyse the data based on demographics, role across all levels within the organisation
• Bridge the gap in case there are any at the earliest to have a culture of fair compensation system