Keeping staff in the dark about pay feeds perception of unfairness

Only half of permanent employees (51%) think they are paid fairly and even fewer (34%) think that everyone in their organisation is paid fairly, a new report from the CIPD, the professional body for HR and people development, reveals.  

The report finds the perception of unfair pay is being driven by employers’ lack of communication around pay. The CIPD are therefore calling on employers to be more transparent about both their pay processes and outcomes.  

When people don’t think they’re paid fairly, organisations reduce their chances of attracting and retaining the best talent. Employers also miss the opportunity to improve employee performance and well-being. 

Charles Cotton, senior reward and performance adviser at the CIPD, said: 

“Failure to be transparent about pay can make staff feel that they are being kept in the dark and feed a perception of unfairness.  

“There’s a real opportunity for organisations to do a lot more around communicating their pay policies to staff, and encouraging line managers to talk to their teams about it, so staff understand how and why such decisions are made. 

“But communication is only part of the story and won’t ensure people are paid fairly in the first place. Continued scrutiny over executive pay and gender pay gap reporting shows this is still an issue which many organisations are wrestling with, so businesses need to be on the front foot when it comes to understanding and assessing pay.”

The CIPD wants to see all organisations have a clear definition of fairness which covers both pay processes and outcomes. This should be developed with input from staff on what fair pay means to them.

Medium and large employers must carry out an equal pay audit on a regular basis to ensure that they are complying with the law, as well as putting in place a narrative which explains to staff and other stakeholders what skills, behaviours, performance and values it wants from employees and how in return it will reward and recognise these. 

The CIPD’s Reward Management 2019 report, which surveyed 2,031 employees and 465 HR professionals, also found:

• One in five workers (20%) think the pay of their CEO is ‘about right’.  
• Three in five people (60%) report that their line manager has never explained to them why they get paid what they do.
• Less than a fifth (18%) of employers have a formal process to assess and manage pay risk.
• Only 39% of employers have carried out an equal pay audit in the past three years to ensure they are complying with the law.
• Only a third (30%) of employers have a definition of what fair pay means within their organisation.

These findings show that too few organisations have appropriate checks and balances in place to ensure that pay is fair. It could result in unfair and inconsistent pay decisions slipping through the net more easily and organisations may be slower to spot them.