It’s well-documented at this point that an employee’s perceptions about how they’re paid and rewarded directly impact their engagement, job satisfaction and employment tenure. Yet, the vast majority of employees do not believe they’re fairly paid.
Feeling underpaid presents problems not only for the individual, but also for employers. An article in the Globe and Mail cites studies showing that feeling underpaid increases the probability a worker will report experiencing “stress, depression and problems with emotions” on a majority of days in any given month. When a worker senses they are underpaid, it also breeds resentment. Both of these issues lead to absenteeism and loss of productivity.
Additionally, we’ve found perceptions about pay play a significant role in an employee’s tenure at your company. For example, 60 percent of employees who perceived they were underpaid said they intended to leave, compared to only 39 percent of those who perceived they were overpaid.
Women are more likely to feel they are underpaid
Here at PayScale, we’ve tracked employees’ perceptions toward their pay for years. When someone takes our salary survey, they’re prompted with this statement: “I feel that I am paid fairly within my organization.” We found only 22 percent of all workers agreed with this statement they’re fairly paid by their employer.
What’s really interesting is how this statistic changes when we break it down by gender and race. We found women tend to have a more negative perspective on their pay compared to white men. And, this is true for women of every race.
Source: PayScale’s 2019 Gender Pay Gap Report.
Additionally, research from Be Leaderly found women are less engaged and passionate at work (67 percent for women, compared to 77 percent for men).
Why women are more likely to feel like their employer isn’t paying them fairly
There are many reasons why women are more likely to feel underpaid and less engaged at work.
First, there is a real and substantial pay gap between men and women, whether we look at the controlled pay gap or the uncontrolled pay gap.
The uncontrolled wage gap looks at median pay for men and women separately, and the difference in the median amount is reported as the uncontrolled gender pay gap. Variables such as education level and years of experience are not controlled for. For 2019, women earn $0.80 for every dollar earned by men.
The controlled pay gap looks at the amount a woman earns for every dollar earned by a man with a comparable job and qualifications. That is, this is the pay difference that exists between the genders after we account for all measured compensable factors, such as years of experience, job level, location and education level. This figure is $0.98 in 2019. In other words, a woman doing the same job or a substantially similar job as an equivalent man makes two percent less than the man.
For more details about the gender pay gap in 2019, check out our new Gender Pay Gap report.
Women tend to lack the support that helps workers advance
Additionally, women tend to face greater barriers to advancement. What the uncontrolled wage gap truly represents is the reality that women are less likely to hold high-level, high-paying jobs than men in an organization. There are structural barriers that keep women in lower-level roles and stifle their careers.
Common barriers include things like being hired into a lower-level role than what’s typical for male candidates, being denied a promotion despite having the qualifications to do the job, not receiving substantive feedback on one’s job performance, not getting clear information about what it takes to apply for a new role or stretch assignment in the organization, the lack of paid parental leave, and working in an environment where women are routinely disrespected or harassed.
Media attention on gender equity is unprecedented
Ever since the #MeToo movement started, media of all stripes have published articles airing companies’ dirty laundry around gender equity. These articles cover issues such as pay disparity, discriminatory hiring and promotion practices, sexual harassment in the workplace and brands’ lack of response to worker complaints regarding these issues. Many of these articles covered lawsuits filed against companies like Google, Oracle and Nike for “segregating women into lower-paying jobs and stifling careers.”
The lawsuit filed against Nike — covered by Alexia Fernández Campbell at Vox — captures the frustration of multiple women who tried to climb the corporate ladder at the firm, which employs more than 67,000 workers in the U.S. and around the globe:
“At Nike, the numbers tell a story of a company where value are devalued and demeaned. For many women at Nike, the company hierarchy is an unclimbable pyramid — the more senior the job title, the smaller the percentage of women. The inequity for women at Nike starts before they do, with decisions about starting pay,” they wrote in their complaint.
One plaintiff, Kelly Cahill, a former brand marketing director, said she was earning $20,000 less than the salary of a male colleague who did the same work.
Given the wide coverage of pay equity in the news, your employees are likely well-aware of these issues. If you haven’t clearly communicated to your employees how they’re paid and why they’re paid the way they are and demonstrated that your pay processes are fair, employees are likely wondering whether your organization might be guilty of similar discrimination.
The real question is this: what can organizations do to make meaningful progress toward equitable pay and equitable outcomes for all employees?
How to Change Perceptions and Make Real Progress Toward Equitable Pay
It’s not enough to conduct a pay equity analysis one time and call it good without backing up your assertions with data. In fact, that is what Nike executives tried to do and the lack of deeper action frustrated employees even more, to the point of initiating a lawsuit. When you communicate the findings of a pay equity analysis, it is critical you provide employees insight into your process and support your assertions with data.
Besides making sure women and men in the same job are paid the same, it’s also important to evaluate your opportunities. For instance, evaluate your hiring practices to make sure women aren’t left behind even from the start.
Achieving equality at work isn’t something you can do overnight. It’s a journey that will take you across multiple terrains and requires buy-in from all levels of the organization. To help you succeed, we’ve put together a brand-new guide called, Your Pay Equity Guide — How to Cultivate Equality at Work. This is a step-by-step guide to help organizations consider all aspects of their operations to ensure inclusion and equality for all of their employees. Download your copy here.