Three hidden pitfalls in pay equity data — and how to avoid them 

This has challenged us to reflect on the pivotal role pay equity and transparency can play in forging a more inclusive world. Fostering an open dialogue on pay equity is one important way in which inclusion is expressed. This is because pay transparency is not just about complying with standards. It is also about accessibility — ensuring that every woman, and every person, feels seen, valued, empowered and included, and that everyone has an equal opportunity to progress. But what happens when revealing pay gap data only makes this overall picture more complicated?

In today’s environment of growing pay transparency, companies that don’t actively engage in open dialogues on pay risk isolating and losing the trust of their employees, candidates and even customers. Conversely, companies who do engage with pay equity and transparency are certain to see this work have a significant impact on their employees’ overall work experience, productivity and sense of inclusion.

Transparency and accessibility don’t always go hand in hand. Pay equity statistics can be tricky and intimidating to navigate for both employees and employers, and it is easy to feel confused and excluded. When we read numbers in the news and on company disclosure reports — full of technical terms such as gender pay, equal pay and the adjusted pay gaps — we are not always clear what they mean, or how they relate to us. It is very easy to gloss over nuances or flaws in the data, or to miss them entirely.

To help with this complexity, organizations like Eurostat — the statistical office of the European Union that releases data on pay gaps — accompany their numbers with helpful information on how to interpret the statistics. This is a good start and we are looking forward to seeing their updated figures for 2024.

Technology can help with demystifying data, but it can also make the situation more complex. As we saw in WorldAtWork’s recent paper on AI and pay equity, and as we have discussed in our own Mercer research on pairing AI with a keen DEI lens, more and more companies are starting to use AI to assess and communicate pay equity, and to even determine pay. While there are clear advantages to doing so, we must also be aware of the potential misunderstandings and unintended negative consequences this approach can bring — problems that can have an impact on individuals, businesses and the broader workforce. This is something we unpacked as part of the recent 2024 Global Risk Report.

Recently we have been reflecting on pay equity scenarios where statistics could be easily misinterpreted. These examples highlight some of our latest thinking on how to turn challenges into opportunities for holistic change. 

In summary, pay equity data can be confusing and can present pitfalls. It can therefore be useful to take a step back and to dig deeper into the data. It is only through this additional analysis — and through the development of a robust change strategy — that you can move beyond compliance (and reporting requirements) to truly achieve the positive impacts of pay equity in your organization.

As we move through 2024 and beyond, HR and company leaders must play an active role in reviewing data inputs, understanding analysis, and communicating findings along with the appropriate context. Having access to market reference data can help to provide context and steer stakeholders in the right direction.

Do you have more questions on pay transparency? Do you want to learn more about Mercer’s holistic approach to pay equity? Or do you have lessons you’ve learned and want to share? If you do, please reach out to our team.