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Pay equity plays important role in employee engagement and retention

April 24, 2017

By Jason Rowe, courtesy of SBAM Approved Partner ASE

Do you worry about hiring the right people? Do you worry about retaining and engaging your current workforce? All in an effort to drive business performance?  Maybe it is time to look at your organization’s pay equity.

Organizations that pay employees equally who are completing comparable work or completing it with a similar level of skill are creating an environment that fosters engagement and retention.  This allows employees to focus on the work, instead of comparing salaries with each other.  A culture like this shows employees that the organization is committed to them and their individual worth as a reflection of the market, instead of an arbitrary starting rate.

The employee lifecycle is also positively impacted by this culture, from helping to attract talent, engage that talent with meaningful work, and retain top performers to drive business impact.  According to a study by Aptitude Research Partners, organizations with a formal pay equity process were 26% more likely to have improved their quality of hire and 42% more likely to have seen their year over year rating on Glassdoor increase.

In the Aptitude study, respondents were asked to assign a percentage to each of six categories, indicating its relative impact on employee engagement and retention. Compensation was the number one component of engagement and retention (see figure below for full breakdown). Organizations that make pay equity a priority see on average 13% higher engagement levels, are 19% more likely to exceed industry average levels of productivity, and see better than industry average turnover benchmarks (54%).
By attracting, engaging and retaining all of the right employees, organizations are seeing increased business performance. Those same organizations that saw above average engagement levels for their industry reported that they were almost twice as likely to exceed industry average levels of productivity and more than two and half times as likely to achieve or exceed the organization’s revenue goals. Understandably, pay equity will not solve all of your organizational issues, however it does provide an excellent foundation for your organization to build on.

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