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02 Mar 2021
by Ken Charman

Pay equity reporting needs to be in real-time, not once a year

In 2021 it seems nearly all CEOs are saying diversity, equity and inclusion is a top priority. McDonalds, with their commitment to achieve gender parity by 2030 is the latest high profile example. For reward professionals this must be welcome news. If we are honest, progress on gender pay has been painfully slow, while the increased emphasis on ethnicity pay gaps is overdue.

 

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The importance of accurate and reliable data

Looking at current methods of analysis and change, there are some obvious weaknesses. Top of the list is data. There are no shortage of very advanced analytical reports but they all depend on accurate and reliable data and, as we all know, obtaining that is so difficult and painful that it tends to be done just once a year.

However, if you report on less than full and detailed data your comparisons misrepresent reality. That creates regulatory and reputational liabilities but, much worse than that, nothing changes. The economic and ethical position remains off balance.

Take gender pay gap reporting for example. If we treat pay gap reports as an experiment, we would conclude; they have been around for a long time, but the annual school report did not tackle the deeply ingrained behaviours that sit behind the many local decisions that determine pay. To break free of this, decision-makers need accurate, up to date and relevant pay equity data in plain view at the point when they make pay decisions. Otherwise, behavioural and unconscious factors persist. Let’s use an everyday analogy to explain why.

Most drivers are not sociopaths but they are habitual speeders. So, in the following scenarios is speeding behaviour more likely to change if:

  • Drivers are shown the average total speed for all drivers once a year?
  • If they personally see their own exact speed when they are speeding past a school doing 60 miles an hour?

The pay equity speedo is even worse than this, because most companies find some forms of speed too hard to calculate.  

I hope you liked the analogy. To modify behaviour then, we need full and accurate data when we are taking decisions. We need to move on from a mentality of the annual report.

The challenges of obtaining full and accurate data

What CEOs and CHROs don’t realise, is that global firms face an enormous data challenge when analysing reward. That’s because pay (reward) is not one thing, it is a combination of many things gathered from widely scattered systems that administrate salary, bonuses, benefits, pensions and shares. Even companies that have invested hundreds of millions in global HR information systems, cannot cope. Reward types need their own specific functionality, variation in reward practice in different countries requires different systems, and the constant cycle of new acquisitions that must be included in the numbers is hard to consolidate. Reward is always scattered.

Our market research conducted in January 2021, revealed that:

  • 90% of firms do not have a reporting platform that shows all forms of reward for all employees in real-time
  • 73% do not include all forms of reward in pay equity analysis
  • 90% cannot analyse pay equity in real-time
  • 76% only perform pay equity audits and analysis once a year.

These harsh facts suggest 2021 looks a lot like 2020 all over again. CEOs will hold their breath in anticipation and when the envelope holding the annual pay equity report is opened they will hear about “1% progress being made here” and how “it takes time for change to have an impact there”, and society will turn away and shake its collective head in contempt.

For the gender pay gap, where companies have had the most time to change, very few sectors can be proud of progress. It is a telling irony that the big consulting firms, who “advise” business on “best practice” are consistently amongst the worst offenders. No wonder business was happy to be released from gender pay gap reporting in 2020! 

The route to delivering change

So, from this sorry starting position how can HR and reward deliver the change that CEOs now demand?  When we were asked to develop a digital solution for Unilever we focused on two fundamental principles rooted firmly in data and delivery: 

  1. Pay equity data must refer to all employees and must account for all forms of reward at the employee level of detail for: salaries, bonuses, benefits, pension contributions, shares and other. There must be no: omissions, sampling, averages, assumptions or allocations.
  2. The pay equity data must be available in a relevant format in real-time at the point where reward decisions are taken and not treated as a once-a-year audit.

The news for CEOs is positive. There is a proven digital solution, but if your pay equity capabilities do not include all reward data and real-time delivery, nothing will change, or at least, not much. The logic is overwhelming.

The author is Ken Charman is CEO of uFlexReward.

This article is provided by uFlexReward.

In partnership with uFlexReward

uFlexReward is an HR Technology spin out from Unilever HR and the first of its kind.

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