To get workplace equity right, companies must ensure they’re hiring, compensating, supporting, and advancing employees based on what they have to offer, not their gender, race, or other factors. But success doesn’t happen overnight. Workplace equity is a journey of progress over time — and requires top-down commitment, ongoing focus, proactive monitoring, and transparent reporting.
A Workplace Equity Platform speeds up the process through purpose-built workflows, automation, and instant calculations, providing a data-driven foundation for decision-making and communication. However, organizations still have to put in the work to build a rigorous program around collecting and cleaning data, scheduling analyses, and taking action to not only remediate existing pay inequities, but also refine and enforce policies to better promote equitable hiring, compensation, performance reviews, and promotions.
Companies might wonder: will all these efforts and investments to achieve workplace equity pay off? What’s the value to our business? Let’s dig into the ROI of workplace equity.
Mitigate the high cost of inaction
The average increase in remediation for every year a business waits, or fails, to address inequity is $439,000.
When it comes to pay equity, the cost of not doing anything is a far greater risk than the cost of taking action. The longer you put off addressing inequities, the more expensive remediation becomes — increasing on average by $439,000 every year you wait or fail to address it.
While remediation has the potential to be costly, it’s a small price to pay to be able to communicate your progress before someone else tells your pay story for you. Employees who want answers are digging into company pay on their own and sharing salaries among themselves. Ignoring or avoiding pay and other workplace equity issues now can snowball into big (and expensive) problems down the road, in the form of employee complaints, discrimination lawsuits, and damaged brand reputation.
Build an employer reputation that attracts, engages, and retains top talent
58% of employees would consider switching jobs for more transparency. For Gen Z employees, that number jumps to 70%.
Employees and job seekers are savvy to corporate lip service and empty gestures. On Equal Pay Day 2022, a Twitter bot called out companies who tweeted platitudes about women’s empowerment while maintaining a gender pay gap. It’s clear that employees and job seekers want companies to put their money where their mouth is to prove that they truly care about employee wellbeing.
Effort and good intentions alone are not enough: data is key to building trust. While diversity pledges and programs such as unconscious bias training are positive efforts, they don’t necessarily impact employee outcomes. Instead, companies should invest in tools and programs that allow them to set realistic, data-based DE&I goals and then demonstrate progress towards measurable outcomes such as equitable compensation (i.e. equal pay for comparable work) and a reduced pay gap (i.e. equal access to advancement and leadership opportunities).
A data-driven approach to equitable hiring, compensation, and advancement becomes a brand opportunity for organizations to communicate their commitment to equity. This creates a virtuous cycle in which companies establish themselves as fair workplaces, which then creates a positive employer reputation that drives subsequent recruiting, hiring, and retention.
Improve productivity and retention
Employees who work in a high fairness environment have 26% higher performance and a 27% lower chance of quitting.
The Josh Bersin Company studied employee experience (EX) practices at over 1,000 companies to create a list of 75 essential practices of EX based on their impact on business outcomes, people outcomes, and innovation outcomes. The sixth most important practice was “Using fair and equitable rewards and recognition practices.” It turns out equity matters a whole lot more to employees than perks, amenities, and physical space.
Companies with employees who perceive they are being treated unfairly — such as being paid inequitably compared to peers — will experience complaints, turnover, and reduced productivity. That’s why transparency is so important: you need to be open and clear about your hiring, compensation, performance review, and promotion policies and practices, and report on workplace equity progress, so that employees know that they’re being paid and treated fairly. This increases employee engagement and, in turn, productivity.
Improve business performance
Companies that disclose they’ve conducted a pay equity analysis report nearly 8% higher mean five-year Return-on-Equity.
Companies that disclose representation by job group tend to see higher returns.
Diverse companies are more likely to financially outperform their peers.
There is lots of evidence that prioritizing and disclosing workplace equity progress, such pay equity, representation, and diversity, result in higher financial returns. Research from The Josh Bersin Company found that companies that make rewards and recognition fair and equitable are four times more likely to have excellent business outcomes and seven times more likely to innovate and adapt to change. Josh Bersin summarized this finding in a recent webinar with Syndio, saying, “The equity experience in your company is one of the most important parts of your performance in the market.”
“The equity experience in your company is one of the most important parts of your performance in the market.”
Improve perception with investors
85% of investment professionals take ESG factors into consideration in their investing.
99% of millennial investors consider social responsibility in their investment decisions.
92% of leaders in a 2022 survey think that ESG issues will affect corporate reputations in the next 12 months.
Mentions of environmental, social, and governance (ESG) and sustainability factors have skyrocketed lately in earnings calls. Social impact considerations are especially gaining prominence after years of being somewhat overlooked. In the U.S., the SEC has indicated that it is considering recommendations on board diversity and human capital management disclosures. In the EU, the European Financial Reporting Advisory Group (EFRAG) recently laid out proposed reporting requirements regarding ESG risks and opportunities, including gender pay gap disclosures.
Investors are also putting pressure on companies by demanding accountability around social outcomes such as equity and diversity. For example, proxy votes on median pay gap reporting have hit some of America’s biggest corporations in recent months. But only one in ten investors found the ESG information they were looking for in corporate disclosures, so it’s crucial for companies to make this information easy to find.
To publicly prove that they are leaders in fair pay, diversity, and opportunity equity, leading companies are communicating their social impact commitments, goals, and progress as part of annual ESG and DE&I reports, as well as through dedicated DE&I webpages and third-party certification.
Adhere to global regulations and disclosures
Between September 2020 and September 2021, the share of companies disclosing an EEO-1 Report or Intersectional Data, the standard for demographic data reporting, has more than doubled, from 4% to 11%.
In March 2021, the EU proposed a directive aimed at ensuring that the right to equal pay is upheld across all member states. There are already pay reporting laws across Europe, including new laws in Ireland, while Germany, France, Iceland, the United Kingdom, Switzerland, and several other countries have regulations around equal pay for equal work and the gender pay gap. Meanwhile, pay scale transparency legislation is expanding across the U.S. and the California Senate recently passed a pay scale transparency bill that would also require reporting on the median pay gap (it now moves on to the California State Assembly).
Companies that proactively focus on workplace equity will simplify compliance with international discrimination legislation and pay equity laws, and adhere to SEC human capital and DE&I disclosures. They will also future-proof themselves against the likelihood of expanded workplace equity-related laws and regulations.
Mitigate legal risk
The estimated annual cost of losing and replacing more than two million American workers who leave their places of employment due to unfairness, discrimination, or harassment is $64 billion.
Settlements for pay and opportunity discrimination regularly cost companies tens of millions of dollars. Headlines about discrimination lawsuits are also highly damaging to employer brand reputation, impacting recruitment and hiring with job seekers who expect fair, inclusive, and safe work environments.
Companies who take a proactive approach to preventing workplace inequities will not only be able to reduce the likelihood of discrimination lawsuits, they will also be able to own their workplace equity narrative by clearly communicating what they are doing to promote equity and inclusivity at their organization.
Workplace equity: A business imperative, not a nice-to-have
“The cost of equity is not high. The cost of equity is really kind of zero. It’s just a matter of doing the work.”
Making measurable progress towards workplace equity provides ROI by mitigating negative impacts such as reducing the compounding costs of remediation over time and lessening the likelihood of complaints, lawsuits, and brand damage. But it’s also a net positive, leading to an easier time recruiting and retaining top talent, improved employee engagement and productivity, and improved business performance.
During a webinar Syndio hosted with The Josh Bersin Company, Josh Bersin summed up how workplace equity has become table stakes for companies by saying, “The cost of equity is really kind of zero.” He leveraged findings from a study conducted by The Josh Bersin Company to show how equity is a foundational component of the employee experience, making it a critical business success factor that modern businesses ignore at their peril.
Syndio’s Workplace Equity Platform and the ongoing support of our team of expert advisors makes achieving progress around equity is easier than ever. You will not only be able to track and measure employee outcomes, but you’ll also be able to communicate your commitments, goals, and progress with confidence — to leadership, boards, investors, employees, job seekers, and consumers.
Want to learn more about how workplace equity can drive sustainable outcomes for your business?