Senior Consultant Curo Compensation Limited
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What role does pay equity play in the Covid-19 crisis?

The Covid-19 crisis has changed the business environment overnight and while diversity, inclusion and equal pay may have taken a backseat in the early days, the situation has in fact highlighted the issue of wage disparity. We now have an opportunity to fix this problem going forward.  

28th May 2020
Senior Consultant Curo Compensation Limited
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Gender equality and equal opportunities in corporate business concept. Vector with businessmen and businesswoman on same pile of money.
iStock/Feodora Chiosea

At the start of 2020 many organisations were engaging actively in the conversation of diversity, inclusion and equal pay. A survey from World at Work indicated that undertaking a pay equity audit or some form or proactive pay equity analysis was high on the agenda for many this year.

Trust in pay practices is something employees need right now whilst they feel financially vulnerable.

In a matter of weeks, however, the impact of Covid-19 has significantly transformed the employment landscape. We have been propelled into a crisis management scenario, dealing with the rapidly spreading pandemic whilst focusing on keeping employees safe, protecting our businesses and navigating uncertainty amid constantly changing conditions. With so many different competing priorities, it’s easy to see why a focus on these issues may have slipped as a priority.

Wage disparity highlighted by the Covid-19 cataclysm

Ironically, wage disparity has been highlighted by the crisis. Firstly, between high and low earners because those who we have come to rely on most as key workers or those who have been most impacted by job loss have turned out to be the lowest paid in society.

High earners are more than twice as likely to be able to maintain work continuity and pay by working from home. Recently PwC reported that 70% of people who earn over £50,000 per year are able to work remotely, compared with just 32% of people earnings less than £20,000. At the same time the Institute of Fiscal Studies (IFS) reported that low earners are seven times as likely as high earners to have worked in a sector that is now shut down. The IFS also reported that one-third of those critical care workers we are depending on to keep us and our families safe earn less than £10 an hour, with food and social care employees paid the lowest paid. Employee representatives are calling for a review of working conditions and pay as a result.  

This isn’t just about monitoring pay – pay equality is about everyone having the opportunity to earn the same and the same experience in the workplace across the talent lifecycle.

Turning to protected category groups, there has been a lot of commentary on how women are bearing the brunt of the pandemic. Firstly, due to the fact they are heavily represented in front line key worker jobs. Women account for 70% of the health and social care sector in the 104 countries analysed by the World Health Organization (WHO). They’re also struggling with a loss of work continuity due to their representation in sectors hit most by lockdown. In addition to workplace presence, more than 75% of women are also primary caregivers, spending as much as 50% more time caring for family members than men. As schools have shut down and childcare centres close, this care burden is often falling to women who are opting to take furlough or reduced work (and pay) in order to balance home schooling or caring for vulnerable family members.

Ethnic minorities are similarly impacted economically by the crisis, again through job loss due to their congruence in low paid insecure work, and as unemployment numbers rise, minority representation in these figures grows. What’s more concerning is the disproportionate number of ethnic minority virus victims. When exploring why this might be, it seems likely that social and economic disparities can lead to poor outcomes on health. All of this highlights why now is not the time for progress on pay equity to be derailed.

Prevent litigation and foster trust  

Before the crisis, the risk of litigation and fostering trust were the two primary drivers for action on pay equity. The stark reality is that these are even more relevant now. We are all under stress at work, at home and in our communities. Many are facing the unexpected reality of reduced or no income. At times of high stress and financial hardship there is a risk of employees being more litigious, as concern about fair treatment is exacerbated.

Proactive action on pay equity isn’t just about a fear of litigation, however. Increasingly employers of choice recognise that promoting fair pay and pay transparency is critical for employee engagement and trust. Trust in pay practices is something employees need right now whilst they feel financially vulnerable. Unfortunately, employers are often reticent to openly communicate about pay. A proactive pay equity audit allows you to both quantify your risk and feel confident about communicating that your pay policies are fair.

coronavirus hub

Could salary re-leveling help close the pay gap?  

Many employers are putting in place pay freezes or salary reductions to align staff costs with reduced business activity. Just as you would monitor pay increases by protected category during a compensation review, the same should apply to pay decreases to ensure fairness and monitor for unintended bias.

Salary re-leveling exercises also provide an opportunity to address and potentially remediate pay inequity. Some commentators are saying this an ideal opportunity to close the pay gap forever – for example by not reducing pay for those who require pay equity remediation. The reality is that those who have enacted pay cuts during the crisis phase had to do this so swiftly and that taking an across the board approach – scaled by seniority – seemed like the fairest approach. We will continue to be in a cost constrained environment for some time, however, so it’s good to have pay equity analysis available to factor into cost reduction exercises.  

Remember though, this isn’t just about monitoring pay – pay equality is about everyone having the opportunity to earn the same and the same experience in the workplace across the talent lifecycle. To support this, we advocate tracking protected category representation across all stages of the talent lifecycle.

Decisions made during recruitment, hiring and promotion and headcount reduction are all at risk of unintended bias - it therefore makes sense to do the same through downsizing exercises. So, whatever changes you are making to your employee base right now, make sure you track this by protected category.  

Workforce restructuring decisions will impact pay equity analysis

Workforce restructuring decisions in response to the Covid-19 crisis are likely to impact your pay equity analysis. Whatever sector you are in, your employee demographics are shifting – whether that’s through headcount reductions, new hires or workers transferring to new roles and workplaces. This will have an impact on the continuity of your pay equity analysis. For example, when looking at average pay gaps we know representation has a big impact on what these numbers look like. If the number of projected category employees fall, there is a likelihood your pay gaps may increase. That will be a difficult storyline to explain to employees and external stakeholders.

As we move into the next phase of the crisis, working through exit plans, the spotlight will continue on pay equity, especially when so many employees in vulnerable groups have been impacted during this period. Hopefully, some of the consequences may in fact be an opportunity to fast forward progress to earnings parity and drive the systemic change needed to advance a fairer workplace for all.

Interested in this topic? Read Gender pay gap: why critics won’t miss this year’s reporting.

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