Addressing Common Pay Equity Misconceptions
When organizations avoid tackling pay gaps, it’s often because of three mistaken beliefs:
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“Exceptions are fine if the hire is right.” It’s tempting to overpay for top candidates, but this creates internal misalignment and long-term resentment.
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“Finding pay gaps opens legal risks.” Inaction poses greater risk. Transparent action reduces exposure and builds trust.
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“Fixing this takes too many resources.” Progress doesn’t need to be perfect. Incremental improvements yield compounding results.
Pay equity in compensation strategy doesn’t require perfection—it requires intent, structure, and commitment.
What Makes a Compensation Strategy Fair, Relevant, and Right?
Fair
Fair pay isn’t about matching every employee’s expectation—it’s about consistent criteria and unbiased systems. Without structure, subjective decisions can spiral into systemic inequities.
A lack of oversight can allow patterns to go unnoticed. For example, a department where underrepresented employees receive fewer promotions or smaller bonuses could signal deeper issues that only a compensation audit will uncover.
Framework for Action:
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Implement structured pay bands and bonus criteria
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Audit manager-level pay decisions biannually
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Track promotions and bonus discrepancies across demographics
Relevant
Relevance means using the right benchmarks. Many companies compare pay to peers in their business sector, but that’s not always helpful.
Compensation should align with the talent market, not the product market. A mid-level IT specialist in Omaha isn’t competing with peers in Silicon Valley—they’re comparing offers from similar local employers.
Framework for Action:
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Use talent market data, not business competitors
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Update local benchmarks annually
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Segment roles by geography and skill scarcity
Right
The right strategy enhances manager-employee trust. Pay transparency policies often fall short when managers can’t explain decisions. When HR overrides bonus decisions without communication, it erodes credibility.
Build a culture where managers are equipped—not surprised—by pay decisions. This reduces perceptions of favoritism and improves retention.
Framework for Action:
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Provide talking points with bonus communications
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Train managers in compensation philosophy
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Document decision rationales in performance reviews
While there is no one-size-fits-all solution, an outside accountability partner can give you a fresh and neutral perspective on disparities, trends, outliers, and opportunities within your compensation environment. If you have questions, reach out. We love what we do and are happy to brainstorm about DEI-friendly analysis and compensation strategies that might work best for your situation. Now available: MorganHR’s comprehensive benefits report! MorganHR takes a look at how total talent and rewards strategies are evolving in light of unprecedented diversity initiatives, COVID-19, shifting demographics, and more.
Download the report.