Fairness in pay: gap between HR perception and employees' views

Only half of employees think they’re paid fairly, and even fewer think that everyone in their organisation is paid fairly according to CIPD research.

Reward Management 2019 finds the perception of unfair pay is being driven by employers’ lack of communication around pay. The purpose of the research was to provide a benchmarking and information resource on current and emerging practice in UK reward management. It surveyed over 2,000 employees and 465 HR professionals.

Fairness of pay management

  • There is a difference between what HR respondents to the survey believe is happening and what employees report. Three-fifths (60%) of organisations claim they talk about the fairness of pay processes and outcomes. However, when staff were asked a similar question, only 10% reported that their line manager always or often talked about both the fairness of the pay process and outcomes.
  • While most employers claim to talk about fairness, just a third report having a definition of ‘fairness’ that they use in their communications about pay management.
  • Few employers survey their employees to check whether they think the pay process and outcomes are fair. The most common methods employers use to test pay equity are gender pay gap (used by 60%) and equal pay audits (39%).

Effectiveness of line managers

  • There is a ‘stark contrast’ between the views of HR and employees regarding the role line managers have in communicating the application of pay policies. While around half of employers say that their line managers have moderate or full involvement in communicating to employees about pay levels and pay rises, more than three-fifths of employees claim never to have had an explanation from their managers about why they get paid what they do.
  • Where line managers do talk to their staff about pay issues, more employees feel their line managers are doing a poor job of communicating than those who think their managers are doing a good job.
  • Among those employers that give line managers a role in making decisions about employee pay, just 38% assess the effectiveness of their line managers in this role.

Management of risk, transparency and pay

  • Just under a fifth of organisations claim to have formal arrangements for risk-managing pay processes. A further third though, while having no formal process, do have risk mitigation built into their review of the pay process.
  • Only around half of employers communicate about how pay increases are decided, how pay structures work and what staff need to do to get a pay rise. Communicating on how pay is determined in ways that enable individuals to compare their situation with others is even less prevalent.
  • Most employers (60%) use a pay structure to organise base pay, with individual spot rates/salaries, narrow grade pay structures and salary increments being the most common. Pay progression along these grades is usually aligned to individual performance, competencies and skills. The most common factors determining where jobs should go within pay grades are the knowledge and skills required, the complexity of the job and the amount of judgement/decision making needed.
  • There appears to be a long-term decline in the use of performance-related variable and non-variable reward schemes, with only 44% reporting their use in 2019, down from 65% in 2012. As reported in 2017, HR find increasing resistance among line managers to deal with the angst and bureaucracy of performance-pay arrangements without the ability to generate significant increases or bonus levels due to budgetary constraints.
  • Almost a fifth (23%) of workers have asked for a pay rise in the past two years; men (25%) appear to be more confident about asking for an increase than women (20%).