Only 32% of employees think their compensation is fair while other think they are not paid reasonably, according to a new survey by consulting firm Gartner Inc.
Employees’ perceptions of unfairness can be attributed largely to trust — or lack thereof — in their organizations, according to Gartner, which surveyed more than 3,500 employees. Toxic culture, poor inclusivity, inadequate work-life balance and unfair experiences can all undermine that trust.
These feelings have sharpened as record inflation has stressed budgets and a historically tight labour market has resulted in new hires scoring more generous salaries than those workers who stayed loyal throughout the so-called Great Resignation. New York City’s pay transparency law took effect at the beginning of November, drawing even more national attention to the issue. As many head into salary negotiations for 2023, worker impressions of equity and fairness loom large.
“Employee perceptions of pay equity aren’t rooted in compensation,” said Tony Guadagni, senior principal in the Gartner human resources practice, in a statement. “Instead, the main driver of perception is organizational trust — when employees don’t trust their employers, they don’t believe their pay is fair or equitable.”
In reality, most companies are working to close pay gaps, according to a separate Gartner study. A survey in July of more than 100 compensation leaders found that more than eight in 10 organizations conduct annual pay equity audits.
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Employers are rarely transparent about compensation with their workers. A Gartner survey in May of over 3,200 employees found that fewer than a third are aware their organization is prioritizing pay equity, and only two in five understand how their pay is determined. Many resort to third-party pay sites and conversations with colleagues to gain insight instead.
Some companies are listing salary ranges with their job postings to comply with pay transparency laws. Only New York City and Colorado currently require pay ranges to be listed on job ads. With regulation slated to take effect in California and Washington state next year — and New York state potentially to follow — more companies have been motivated to adopt the salary range practice on listings nationwide.
Direct communication about how pay is determined can go a long way toward boosting perceptions of fairness, according to Gartner. So can increased accountability around compensation decisions.
“When organizations educate employees about how pay is determined, employee trust in the organization increases by 10% and pay equity perceptions increase by 11%,” Guadagni said.