Pay Equity – Is the Landscape Changing?

In March 2018 we considered the notion of equal pay for work of equal value and continue to monitor the pay equity landscape. As traditional employer / employee relationships evolve, so does the complexity of these relationships and this complexity may foster further triggers of pay disparity.

We believe pay equality should exist. That is, equivalent work that produces equivalent value should receive equivalent pay. While this sounds simplistic, it is often difficult to implement as there are situational factors which can influence the achievability of pay equality. For example, we live in a rapidly changing society and the probability exists that changes in social values could be a cause in itself for pay inequality.

It is our view that organisations should use a standardised framework to assess organisational roles so that they understand the work dimensions and derived value components. Using this approach, a base remuneration outcome can be derived. This base remuneration will then need to be assessed against situational factors and adjusted accordingly.  Consider:

  • The physical location of where the work occurs;
  • Industry specific dynamics (i.e. skills shortages, supply and demand for labour and specific sector/organisation work demands);
  • The relative cost of living related to where the work will be (or from where the workforce will be sourced). Is it possible for the same role and same work to have differential remuneration across states, cities or country towns?
  • The qualifications required to complete the work. Should more qualified employees be rewarded more or the same?
  • The relative experience of candidates available to do the work;
  • Should top performers be rewarded more or the same as marginal and/or average performers?
  • The continuous hours required to complete the work. Should 8 hours a day be rewarded differently on an hourly rate to 12 hours?
  • The source of funding for the role. Should Government employee roles being tax-payer funded be paid less than equivalent positions in the for-profit sector?

These are just a few considerations which will put pressure on a role’s remuneration and at times could result in a potential premium being paid. What should be noted is that while the consideration of multiple factors may result in actual differences in pay it may also lead to perceived pay inequality when it actually isn’t. The challenge for employers when conducting such remuneration/work value exercises is the transparency and accuracy with which the remuneration review is implemented.

Egan Associates actively works with organisations in their assessment of role accountability, work value and remuneration to understand the pay equality matrix.

While the assessment of work, value, and remuneration should lead to measurable variances in pay (or equality) our evolving social framework may be creating additional complexity as a view of value from the employee’s perspective emerges as a value attribute. It is worth asking:

  • Will the gig economy maintain value equality, or will there be a value trade off to compensate for lifestyle changes? If there is a value trade off can this be measured? Will it be consistent across employees?
  • Will the employee desire and demand for work / life balance adjust the value proposition?
  • Will remuneration models adjust for positive lifestyle choices relating to variable conditions such as working from home, or working remotely? Conversely, will remuneration adjust for adverse impacts such as travel or increased on-site hours to meet outcomes? A challenge in determining/agreeing value equivalence exists as the perception of value may be different for different employees.

The above reflects some of the emerging value dynamics within the workforce and what they highlight is the changing perception of work, its value to the employer and related remuneration. Traditional employer work value models may need to be adjusted to allow for employee value preferences as our society evolves and places demand on lifestyle over work. While it may not be the employers’ responsibility to cater for these preferences (ultimately the employee has choice) there is likely to be pressure for an employer to account for the employee preference in remuneration.

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