Incentives for Growing Companies No.2: Pay Equity Analysis

Pay equity can also be defined as equal pay for work of equal value. Therefore, if two people, irrespective of gender, ethnicity, religious views are contributing equal value to a company, those two individuals should receive equivalent pay.

The best way for a company to ensure there is fair pay equity is to start with a pay equity audit (PEA). This includes comparing the pay of employees in the same roles, and investigating any differences in pay which cannot be justified – this is where inconsistencies and subjective decision making can be identified. These inconsistencies are then addressed and relevant adjustments are made, followed by identifying the operational gaps which led to this issue in the first place.

When assessing the gender balance in executives in small to medium sized companies, there has been a growth in the number of females taking on some executive board positions, particularly in finance roles. The following statistics can be shared which demonstrate this (data sourced from our E-Reward Database):

• Within FTSE mid-250 companies, the greatest progress has been at the CEO level, where the proportion of females has risen from 7.7% to 11% among those recruited in the last five years, up to 18.8% for those joining in the last 12 months.
• The same trend can be seen in FTSE SmallCap companies, where the proportion of females is greatest in CEO roles, at 7.3%. The figure is 12.5% when including those who had been recruited in the last five years, and 28.6% for those joining in the last 12 months (note this was marginally smaller than last year).

These increases are encouraging, obviously, but there is still a long way to go in providing fair pay practices within organisations. It is important that companies are truly transparent about their progress towards a more inclusive and diverse business, and as such companies are expected to report pay gap reporting (including gender pay gaps, ethnicity pay gaps, disability gap gaps, sexual orientation pay gaps).

Remuneration Associates assists clients with all pay gap calculations, so that ‘fair pay equity’ becomes the norm.