Pay equity within organizations of all sizes has come under increased scrutiny as federal, state, and local legislators have taken steps to require pay transparency in job postings. 

It’s the latest in a long-standing series of efforts designed to close the pay gaps that have long persisted between individuals of different racial backgrounds and genders.

While equal pay laws have long been in place, they haven’t moved the needle to the extent that many — including Mercer — feel it needs to be moved. The rise of US and international pay equity legislation, activist investor shareholder proposals, and public expectations for disclosure are driving change and transparency. More organizations are publicly stating their commitment to equal pay for equal work, but actually achieving this commitment is less straightforward. The journey to pay equity requires navigating complexities that can unintentionally result in pay inequities which remain pervasive and problematic.
Pay equity has evolved from a standalone program often separated from other compensation management processes to a critical business imperative under intense scrutiny. Organizations are now expected to conduct thorough and proactive pay equity analyses to meet the growing demands of business leaders, shareholders, and legal requirements. The landscape is marked by increased pressure from activist investors, especially in the technology and financial services sectors, and by new legislation, such as the EU Pay Transparency Directive. 

CHROs face a myriad of pay equity challenges

Today’s pay equity landscape has been significantly impacted by calls for pay transparency that have been strengthened and bolstered through new and emerging legislation requiring pay transparency in the hiring process in many geographies. This is occurring not just in the US, but around the globe.

The recent emphasis on pay transparency has accelerated progress towards pay equity and bolstered public pay equity commitments. With this acceleration, many companies are shifting their focus from a compliance-driven approach to pay equity to one that is motivated by a desire to uncover and proactively assess systemic pay inequities. The downstream benefits of these actions go beyond supporting the achievement of pay equity goals — they also provide a foundation for supporting disclosure requirements, pay equity reporting objectives, and pay transparency.

As a burden faced by today’s CHROs, developing a pay equity program is demanding and requires experience and skill across several disparate areas:

  • The complex regulatory environment. 
    Regulations vary, and are continually changing and emerging, on a global, national, state, and local scale. The larger the organization—and the broader the recruitment market—the greater the complexities.
  • Analytic burden.
    Pay equity analysis requires the unique skill combination of both human capital knowledge and expertise in conducting accurate and reliable statistical analyses in a high-stakes environment.
  • Remediation and strategy. 
    Statistical analyses of HRIS data frequently reveal gaps—and those gaps must be addressed. Identifying pay disparities is just the first step. Developing and implementing remediation strategies that align with budget constraints, organizational goals, and employee questions and challenges are crucial mandates.
  • Sustaining equity. 
    Achieving pay equity is an ongoing process that requires a long-term view, vigilance, and continued refinement of compensation practices to prevent future disparities.

Consider that compensation practices are just one piece of the typical CHRO’s areas of focus and it becomes abundantly clear that these efforts can represent a significant responsibility for HR leaders who are already overburdened.

Up-to-the-minute expertise and a third party perspective

To ensure equitable compensation practices, it is critical to have a partner who is both able to navigate the evolving regulatory landscape and the analytic prowess to navigate the complexities of pay equity. Mercer brings unparalleled experience and a suite of advanced technology and tools to the table, ensuring that your organization’s pay equity strategy is not only compliant but also a model of best practices. 

When you partner with Mercer, you’ll benefit from a comprehensive and refined process that includes customized solutions tailored to the unique needs of your organization and pay practices: 

  • Data collection

    Extensive data collection on employee demographics, compensation, and other relevant factors that influence pay.

  • Analytical rigor

    Analytical rigor and sophisticated statistical modeling that involves segmenting the workforce and applying regression models to identify systemic pay differences, and ensuring that the models reflect the organization’s unique compensation philosophy and principles.

  • Risk identification and remediation

    Risk identification and remediation that identifies areas of risk and calculates the necessary adjustments to achieve pay equity objectives, close systemic pay gaps, align pay levels with model expectations.

Mercer’s process

Mercer’s experience in this area ensures that you’ll benefit from a rigorous approach fueled by cutting edge statistical methodology and technology while being delivered by human capital consultants with deep expertise.

  1. Data review
    Reviewing, cleaning, processing your HRIS data, and sharing data insights.
  2. Regression-based and other advanced pay models
    Using regression-based and other advanced pay models to control for employee, job, and organizational factors within workforce segments.
  3. Measuring pay gaps
    Measuring pay gaps, reviewing efficient remediation strategy options, and delivering precise pay adjustment recommendations to close gaps.
  4. Root-cause analysis
    Root-cause analysis to understand causes of gaps and to close them before they open, pay equity communication guidance, and ongoing support through the adjustment process. 

This isn’t a “set it and forget it” process. The pursuit of pay equity is an ongoing process that requires vigilance and the continual embrace of proactive solutions, such as embedding pay equity within the merit cycle, customizing remediation strategies to achieve multiple objectives, and leveraging pay equity successes to support other HR initiatives.

From initial data preparation to assessment, review, and guidance — and beyond — Mercer’s human capital consultants will be your guide for navigating the pay equity and pay transparency terrain.

Discover the benefits of Mercer’s PayAI™ tool.

Risk Mitigation

Ensure consistent and unbiased pay decisions, compensation governance, and documentation with minimal overhead.

Spend Optimization

Pay the right amount for the right candidate and role to maximize your personnel budget.

Process Efficiency

Streamline pay decisions around new hires, promotions, job changes, and end-of-year merit.

Employee Engagement

Prepare for a world of pay transparency by ensuring fair and consistent pay decisions across your organization.

The benefits of working with Mercer

Mercer’s approach goes behind compliance, focusing on organization-level change and maintaining a vigilant focus on equity. When you partner with Mercer to conduct a pay equity assessment, you’ll benefit from:

  • Independent analysis
    Independent analysis and an unbiased lens from a third-party advisor that can identify discrepancies that may be systemic — or overlooked due to internal biases or blind spots.
  • Global experts and experience
    Global experts and experience in addressing pay equity, which is crucial for multinational companies that need to navigate different legal and cultural landscapes.
  • A comprehensive approach
    A comprehensive approach based on statistical methods that conform to high standards, ensuring a significant and sustainable impact on pay equity.
  • Local compliance support 
    Local compliance support to support regulatory submissions and other required activities which is imperative for navigating complex current and continually emerging local compliance issues. 
  • Data-driven insights 
    Data-driven insights to objectively understand what needs to be changed — and how to implement needed changes effectively. 
  • Bias-free talent management
    Bias-free talent management to benchmark and redesign HR policies and people practices to minimize bias and attract and retain top talent.
  • Strategic interventions 
    Strategic interventions that focus on root causes rather than treating symptoms. 
  • ESG disclosures
    ESG disclosures to ensure that both mandatory and voluntary Environmental Social, and Governance (ESG) disclosures are thoroughly and accurately covered.
  • Continuous improvement 
    Continuous improvement through best-practice processes designed to continually listen to the needs of key stakeholders while being attuned to market changes. 
Working with Mercer can help companies mitigate potential risks related to pay equity including employee turnover, brand equity issues, and lawsuits. It’s an investment in peace of mind and the confidence that your pay practices can withstand scrutiny not only from regulators — but from current and prospective employees as well. This is not a quick fix, and shouldn’t be approached as one — but a long-term, strategic, and sustainable business strategy.  

Authors:

    Mercer is here to support you on your journey

    Mercer has a view on where pay equity is heading, and the bench strength and experience to provide bests practice insights into future trends and challenges — while ensuring that current business practices are compliant, based on solid data, and designed to mitigate any legacy inequities.

    Gain peace of mind and the confidence that your pay practices are based on solid data and statistical models, consistent with all applicable laws and regulations, and designed to establish your organization as a company committed to pay equity — today and into the future.

    Contact us today to learn how we can put your pay practices on the right track.