Playing It Fair: How to Implement Pay Equity at Work

In this era of increased transparency and social consciousness in the workplace, pay equity — or providing equal pay for equal work — has become a critical concern for many businesses. It is anchored on the resounding consensus that diversity, equity, and inclusion (DEI) matters.

These days, implementing fair pay policies extends beyond mere compliance standards. Organisations use this technique to gain a competitive advantage in an increasingly tight labour market. Progressive employers who prioritise the provision of equal pay are not only able to improve the company’s reputation but are also well-positioned to drive employee engagement better as well as attract and retain talent.

No wonder up to 76% of employers in Singapore are currently providing or planning to provide fair salaries or an equitable renumeration system to workers, according to JobStreet’s 2023 Hiring, Compensation & Benefits Report.

Yet despite the many advances in equality in society, pay inequity still exists in workplaces all over the world, especially for women, people of colour, and other minority groups. This results in significant pay gaps among people holding similar roles, which may compound over time. By understanding the basics of implementing pay equity, you can help eliminate work discrimination and create a culture of fairness and equality, ultimately boosting employee satisfaction — and your company’s standing — in the long run.

Pay equity is a fundamental principle that advocates for proper compensation of employees performing similar job roles, regardless of gender, race, age, religion, or other non-job-related factors. It ensures that employees receive equal remuneration for work requiring equivalent skills, responsibilities, and effort.

International organisations like the International Labour Organisation (ILO) endorse the concept of pay equity, which is also enshrined in labour laws worldwide, such as the U.S. Equal Pay Act, to combat wage discrimination and promote social justice and economic fairness. While no specific law mandates equal pay for equal work in Singapore, the Tripartite Alliance for Fair & Progressive Employment Practices (TGFEP) lists guidelines on fair employment methods to reduce work discrimination.

In Singapore, there exists a gender pay gap in the local landscape, though it is said to be narrowing in recent years. In the financial industry, for example, female workers earned 15.5% less than their male counterparts in 2022 — an improvement from the 27.1% gap of a decade ago, says the Ministry of Manpower. The country is also developing workplace anti-discrimination legislation and plans to introduce its first workplace fairness law in 2024.

It is important to note that pay equity does not mean equal pay for everyone. Disparities in wages may be reflective of legitimate job-related factors such as:

• Educational attainment

• Experience

• Skills

• Location

• Performance

• Tenure or length of time with the employer

Imagine two employees, both working as Executive Assistants (EAs), one male and one female. They have the same job responsibilities, qualifications, and experience. Pay equity, in this case, means that both the male and female EAs should receive the same salary for their identical roles, eliminating any wage disparity based on their gender.

However, in a case where one of them has a more advanced educational level — let’s say the female EA has a master’s degree in communications while the male EA only has a bachelor’s degree — it would be reasonable for the female EA to receive a higher salary than her male counterpart. The wage disparity is based on the higher qualifications of the female EA, making the pay difference legitimate and justifiable.

Aside from being an integral component of a company’s social responsibility, implementing fair pay policies is also crucial to a business’ bottom line. Here is a quick look at why pay equity matters:

The law requires it. Compliance with labour laws helps companies avoid legal disputes and penalties. While Singapore currently does not have legislation in place about pay equity, the TGFEP offers provisions related to the fair treatment of employees.

It boosts morale and productivity. Multiple studies have established a direct link between pay equity and employee engagement. When employees perceive that they are being paid equally regardless of gender and other factors, they become more motivated to work. It results in higher productivity, impacting overall organisational performance and success.

It enhances the company’s reputation. Companies known for their commitment to fairness are seen as socially responsible and ethical, making them extra appealing not just to candidates but to customers, partners, and investors as well.

It reduces discrimination and fosters economic equality. Pay equity helps eliminate wage discrimination, ensuring that individuals are compensated fairly based on their qualifications and experience. It also reduces income inequality in society, resulting in broader economic benefits.

It helps in talent acquisition and retention. Research has found that about 40% of women would quit their jobs over inequality in pay. That said, employees are more likely to stay with an employer that values and rewards their skills and efforts fairly.

It promotes diversity and inclusion. An organisation that commits to pay equity encourages a more inclusive culture, attracting talents from various backgrounds and ultimately enhancing workplace diversity.

Achieving pay equity is more than simply eliminating biases. Employers and HR personnel must weigh in several factors, including the candidate’s education and work experience, the responsibilities expected of the position, and the company’s long-term financial stability.

To avoid pay disparity, here are some practices you can adopt:

Analyse your current pay. The first thing you can do is conduct a pay equity analysis or pay equity audit (PEA). It is a statistical way of identifying the pay gaps within a company — a process that entails a comprehensive and unbiased analysis of pay data. It typically requires the joint effort of HR personnel, finance experts, and sometimes external consultants or legal advisors.

Conducting a pay equity audit usually involves these steps:

• Collect data: The team must gather information on employee salaries, job roles, and demographics.

• Group similar jobs: Roles that are alike in terms of skills, responsibilities, and experience are grouped.

• Check for pay differences: Identify gaps, especially related to gender, race, and other protected characteristics, by comparing existing salaries from the groups.

• Adjust as needed: Make the necessary adjustments to bring everyone to equal pay levels.Discrepancies that cannot be explained by non-discriminatory reasons may require further investigation.

• Monitor regularly: Conduct regular checks and updates to maintain fairness.

Practice pay transparency. In a study by Visier, up to 68% of candidates said they would be willing to change jobs to join a company with pay transparency. Aside from closing wage gaps, being transparent about the salary — as early as during the hiring process — helps build a culture of trust as employees gain a clear understanding of how their pay is determined.

Since the topic of salaries can be a sensitive subject for some people, it’s also good to develop an internal communications plan detailing the company’s pay equity goals and providing proper channels for workers to raise salary-related issues.

Create salary bands. A salary band system creates standard pay levels based on the ranks of the positions in an organisation. Setting and following one allows the company better consistency in providing equal pay — one that’s based on the role itself, not the employee’s demographics.

And since it’s a stepped system (categorised into specific levels or grades), it gives employees a better understanding of what’s due to them, and what they can expect as they progress in their careers. For example, an entry-level Marketing Specialist may have an employee baseline pay of $3,500 and a cap of $6,500 monthly, while a more senior counterpart — let’s say a Marketing Manager — may have a salary band ranging from $15,000 to $23,000.

Take note, though, that this practice requires continuous monitoring as market trends constantly fluctuate. Plus, document and communicate these salary bands and all pay-related processes to avoid misunderstandings.

Structure eligibility for salary increases. It has been found that one major factor contributing to gender pay gaps is that men are more likely to initiate salary negotiations than women. When your company offers clear guidelines regarding employee eligibility for a pay raise, this gives everyone an equal opportunity to earn more. It also prompts management to be more proactive about evaluating employees for increases.

In Singapore, the Progressive Wage Model (PWM) has been established to help uplift lower-wage workers’ wages through the upgrading of skills and improving productivity.

Train your leaders to create a culture of pay equity. Equip your decision makers — especially your managers and HR personnel — with knowledge of current pay trends based on market data and your company’s compensation strategy. Provide appropriate training that will help them make valid salary recommendations and decisions based on job-related factors, and not an employee’s gender, age, or race. The same goes for promoting diversity and inclusion: It has to start from the top, trickling down from management to the leaders, then to individual staff members.

Continuously monitor and update pay equity practices. Providing fair wages isn’t a one-time thing. Revisit your company’s pay equity strategy frequently to address compensation issues and disparities based on inflation, job skill demands, and other factors.

Improve your overall DEI efforts. By enhancing your diversity, equity, and inclusion programs and policies across the board, you can minimise and eliminate inequities in how your employees are treated.

More and more companies are increasingly emphasising inclusion as a workplace norm. As a business owner and leader, it’s only apt that the culture of equality and mutual respect starts with you — by reassuring your employees that you appreciate what they bring to the table and paying each and everyone fairly, regardless of who they are or where they came from.

What is pay equity? Pay equity ensures that employees receive equal pay for equal work, regardless of gender, race, or other factors. It aims to eliminate wage disparities rooted in discrimination and bias, promoting fairness in the workplace.

Why is pay equity important? It reduces discrimination, boosts employee morale, and enhances workforce diversity and inclusion. Ensuring that individuals are paid fairly for similar roles creates a more just and equitable society while improving organisational performance and employee satisfaction.

What can a company do to promote pay equity? A company can conduct a pay audit to identify and address pay gaps, encourage pay transparency, create clear compensation guidelines, train leaders and decision-makers on pay equality, and continuously monitor and update compensation practices.

Visit JobStreet’s Future of Recruitment and Compensation and Benefits reports for more insights regarding Singapore’s workforce.