How HR Managers Must Address the Pay Disparities and Pay Gaps in Organizations

While Pay Disparities are Natural, Biased Pay Systems are not

In any organization, it is natural for different employees to be paid differently based on their abilities, seniority, experience, and value that they bring to the organization. Indeed, no organization can afford to pay all employees the same unless it is a Non Profit or what is known as a Community Collective where each employee is paid the same.

Therefore, one must be judicious in applying the principle of pay parity across the vertical and horizontal hierarchies without mentioning the factors that go into creating pay disparities.

Having said that, it is also the case that organizations do display biases as far as pay disparities are concerned, especially when women and racial minorities are concerned.

This is one area that has been receiving much attention in recent months as organizational behavior experts are increasingly focusing on the widening pay disparities between male and female employees and between racial categories.

On the other hand, many experts and prominent business leaders too have started questioning the rationale behind the yawning and wide divergence between the pay of the senior leadership and that of the rank and file employees.

Moreover, there are also concerns being raised about how employees in the same horizontal band are being paid differently.

Thus, the point to be noted here is that unless the organizational policies are made more amenable towards rationalizing pay structures, there are bound to be conflicts as well as vitiation of the workplace culture since the disgruntled employees are often demoralized and can even quit the organizations.

What this means is that there is a need to address the pay disparities and the pay gaps at heart of employee engagement if a productive and healthy workplace has to be actualized.

The Role of HR Managers and the Unenviable Task of Mollifying Employees

This is where HR (Human Resource) managers have a role to play as they are in a position to address such disparities.

For instance, most HR managers are cognizant of the gender and racial pay gaps as well as the disparity between vertical and horizontal bands.

Our point is that the HR professionals have an Unenviable task of explaining and mollifying the employees who are left out of the higher pay brackets.

It is usually the case that women employees often raise the topic of pay gaps during Appraisals and One on One meeting with the HR POC or the Human Resources Point of Contact. More often than not, such meetings are tense and most HR managers often offer politically correct responses without any substance.

This is where the HR professionals must ramp up their efforts to convey to the senior leadership about the Heartburn and the Demoralization of women and racial minority employees lest it Morphs into legal and other forms of regulatory action.

Moreover, gender and racial pay disparities are not the only sticking point and in our working experience, we have found that the major reason for discouraged employees is the differences in pay within the horizontal bands.

For instance, most Multinationals employ entry level hires at or about the same basic rank. However, even in the same horizontal band, there are differences in pay which is a major reason for dissatisfaction among such employees.

While HR managers rationalize such disparities by alluding to factors such as whether the employees were recruited straight out of campus, or through offsite job fairs or even direct walk in events, the fact remains that pay disparities at the entry level can be a sore thumb for the organizations.

Vertical and Horizontal Pay Disparities Lead to Specific Problems

Turning to the vertical pay disparities, while it is generally expected that senior leadership is paid more due to their experience, leadership abilities, and overall vision and mission, in recent years, the gap between the pay of the topmost employee and the lower most employee has widened to such an extent that it is now nigh impossible to deny that such disparities have started to make the workforce demoralized.

Indeed, when prominent business leaders such as NR Narayana Murthy of Infosys fame raise the topic, it is worth for whatever it is to listen to them and make genuine efforts at reforming the pay and perks system in organizations.

Having said that, we are not advocating socialism or for that matter, abandoning meritocratic principles.

On the other hand it is our point that while merit and abilities have to be given their due, it is also the case that unless harmonization of pay systems happens, there are bound to be more drastic consequences than demoralization of the workforce.

Such consequences can be Employee Walkouts and other such Tool Down strikes that are now spreading to the Non Unionized Services Sector as well.

A case in point is the recent such strikes by the employees of Google wherein grievances reached a tipping point that led to employee activism.

Conclusion

Lastly, it is no doubt tricky for HR managers to be caught between a Rock and a Hard Place. For instance, they have to execute the organizational policies and on the other hand, they have the task of mollifying the employees.

Therefore, it is important for them to maintain balance between these two often conflicting imperatives.

This is where their wide abilities, deep knowledge, and broad experience come into play and where the skill and competence with which they navigate the tricky situations makes the difference.

To conclude, HR managers do have their task cut out when addressing pay disparities and they must bargain both with the policymaking groups and the employees to drive a fair deal that is mutually acceptable.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


Human Resource Management