Fewer than one third of employees feel they are paid fairly, while just 34% believe their pay is equitable, according to a survey by Gartner, Inc.
The management consulting firm also said that employees who perceive their pay as unequitable display a 15% lower intent to stay with their employer and are 13% less engaged at work.
“Employees’ sensitivity to perceived pay gaps is being exacerbated by today’s economic conditions, including rising inflation, and the hot labor market, which is causing a shift in compensation between tenured employees and new hires,” said Tony Guadagni, senior principal in the Gartner Human Resources practice.
Most organizations are actively taking steps to close pay gaps. In addition, a July 2022 Gartner survey found that 84% of employers are conducting pay equity audits at least annually.
While these kinds of technical approaches are necessary, they don’t address employee perceptions, Guadagni pointed out.
“Employee perceptions of pay equity aren’t rooted in compensation. Instead, the main driver of perception is organizational trust – when employees don’t trust their employers, they don’t believe their pay is fair or equitable.”
Most employees’ perceptions around pay are attributable to general trust in the organization, Gartner added. Factors that erode organizational trust include poor culture and inclusivity, poor work-life harmonization and unfair experiences.
To improve employee perceptions of pay fairness, human resources must act to rebuild employees’ trust in the organization, the company argues.
“Only 38% of the employees we surveyed report that they understand how their pay is determined,” said Guadagni. “When organizations educate employees about how pay is determined, employee trust in the organization increases by 10% and pay equity perceptions increase by 11%.”