Myth-busters 2023: Tackling common misconceptions in pay and reward
We asked our consultants and analysts to raise some common misconceptions and explain where they think misunderstandings may lie.
Pay Gaps – remember the devil is in the detail
When looking at gender pay gaps, we need to be careful not to jump to conclusions by overlooking the detail. Stating headline figures such as “75% of our lowest-paid employees are women” can be too easy when the qualitative detail comes from overlaying the distribution of men and women across a company. In a typical scenario, the 75% above might be part-time female administrative employees, because in most cases those roles can better suit their desired work-life balance. There is every chance that they are being paid the same as the men working the same job, hence the need to drill down into the distribution.
Having a greater distribution of men at the top and lower-paid women at the bottom tends to be the root cause of pay gaps we see, and yet it doesn't mean that pay is unfair. Work still needs to be done to level the playing field in terms of the number of women reaching senior positions but that is a separate issue.
Bonus payment reporting arising from part-time workers can also be misleading. While base pay is annualised to bring part-time and full-time workers onto a level playing field, the data around bonuses is not. Often women’s actual paid bonuses across the board can appear smaller, but that is only a reflection of part-time hours. In both these areas, comparisons need to be cleverer.
Sarah Nash is a consultant working across multiple sectors including retail, leisure, finance and technology.
Recognition: Is it really happening?
The main issues around recognition are a) whether people know how to recognise, and b) whether it's happening. Clients often tell us they need help with pay structures and variable pay, but that their recognition is fine: “We have it covered”.
Of course, there are companies and managers out there who are supportive and do this well, but many are falling short. We see clients with online systems for recognition, but with only a small proportion of workers who can be recognised. If you ask workers if they feel valued by their manager or their peers, the numbers back are often quite low. If you want to embed a culture of recognition, you've got to put initiatives in place to drive and embed it within a company’s culture, and much of the effort needs to come from the top.
Justine Woolf is a Director of Consulting working across Professional Services, Legal, Purpose-led NFPs
Buy salary data you can trust
With the salary market so disruptive, clients are often looking for cheap, ad hoc sources of data to inform salaries, but the data they’re buying can’t always be trusted. Companies claim to have ‘real time’ salary market data better than buying data at a point in time from survey houses. However, these survey houses invest time to ensure the data stands up to scrutiny from employees and leadership, and while it’s not perceived to be real-time, it is very relevant and on-market. Don’t get caught up in easy-to-access data, which generally has a glaring fundamental flaw: it’s not underpinned by logic to enable a firm comparison.
Sarah Lardner is a Principal Consultant & Director working across Media, Digital, Publishing, Financial Services, Energy
Educate employees about Salary vs Bonus vs Pension
Speaking particularly about younger employees, companies could do more to educate around the respective value of salary, bonus and pension, and what each represents. Most often, we are paid our salary in arrears for work we’ve already done, while bonuses are paid at a time of year when the dial is turned forwards to objectives and KPIs for the next 12 months. This can be misleading. Actually, a salary is forward-looking. It’s what you’re appointed or promoted to and what you are capable of. It helps define your value. Variable pay, for example a bonus, is backward-looking, which is why we sometimes question how much it works as a tool for long-term motivation.
In terms of their relative value within an overall package, a bonus – if you receive one – is often considered second in value behind the salary, but a pension will almost always come second to salary and outrank a bonus. More should be done to explain this.
Spencer Hughes is a Senior Analyst
Remote working vs Flexible working
Remote working and Flexible working are not the same thing. The pandemic led to remote working being necessary, so while it now shows a degree of flexibility, it is not a reward. In general, it is also far more straightforward than flexible working, which touches a far broader spectrum of issues.
The offer of flexible working can help companies really compete for talent by giving people more autonomy over their time. For example, they might allow employees to choose, within limits, when to start and finish their working day; or permit the compression of hours into fewer, longer blocks during the week; or count a fixed number of annual hours but vary the length of the working day or week. Direct business benefits include savings on office space and improved employee retention, job satisfaction and wellbeing. The principal challenges tend to be in managing and supporting those workers outside of ‘normal’ office hours.
With retention and recruitment such a focus at the moment, companies do need to look at flexible working, but it should not be confused with simply allowing people to work from home.
Cathryn Edmondson is a Senior Consultant working across Media, Legal, Sports, Financial Services and Not for Profit
More thought leadership from Innecto experts