Introduction Top talent wants to thrive in an environment that reflects their values and promotes equal opportunity. By fostering a culture of equity and fairness, you’re not just doing the right thing, you’re building a competitive and engaged workforce. One area where equity plays a vital role is in employee recognition and rewards. Ensuring that all employees are recognized and rewarded fairly based on their contributions and achievements helps create a sense of inclusivity and fosters a positive work environment. HR leaders increasingly find that achieving and communicating equity in a company’s Total Rewards offering is one of the most vital challenges on their plates right now. Gartner’s July 2022 survey reveals that “72% of total rewards leaders report that their organization’s senior leadership believes that pay equity is a high or very high priority”. However, in the same research, Gartner finds that practice shows that decision-makers still do not prioritize pay equity, especially when hiring critical talent. Equity in employee recognition and rewards is an important element of achieving equity in a company’s total rewards offering. In this article, we will explore practical strategies and steps organizations can take to achieve equity in employee rewards. What Is Equity in Employee Recognition and Rewards and Why it Matters Equity in employee recognition and rewards refers to the fair and unbiased distribution of acknowledgment, incentives and access to resources, support and learning within an organization. In other words, equity in rewards focuses on ensuring that employees are recognized and rewarded based on their individual contributions, skills, and performance, rather than factors such as personal biases, favoritism, or discrimination. When employees feel they are rewarded fairly for their efforts, they are more likely to stay at a company. According to Gartner, “employees who perceive their pay as unequitable have a 15% lower intent to stay with their employer and are 13% less engaged at work than employees who perceive their pay as equitable.” Talent is in high demand again, and the employees know it. Gallup’s findings reveal that employees increasingly feel like it’s a good time to find a job. 53% of employees in 2022 stated that it is now a good time to find a job where they live, a sharp increase from the previous year and close to the record high in 2019. And as employees look for their chances elsewhere, employers need to identify what will make skilled employees stay at a company. Achieving equity in recognition and rewards is crucial as it promotes a sense of fairness, trust, and inclusivity among employees. When employees perceive that their efforts are valued and rewarded fairly, it fosters a positive work environment, boosts morale, and enhances overall employee engagement and retention. Additionally, equity in employee recognition and rewards supports diversity and equal opportunities, leading to improved teamwork, collaboration, and organizational success. Tony Guadagni, senior principal in the Gartner HR practice, states that: “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.” The Age of Pay Transparency Is Already Happening Pay transparency is one sure way to achieve pay equity in workplaces, and it started picking up across the industries. WorldatWork finds that 70% of organizations took action on pay equity in 2022. This number represents a 10% increase since 2019 and a 4% increase over 2021. Employers started viewing pay transparency as a trend. In the US, several states require companies to disclose salary information in job postings. Companies that make headway at working towards truly equitable workplaces see their efforts paying off. SHRM finds that “70% of organizations that list pay ranges say it has led to more applicants, 65% say pay ranges make them more competitive”. In the EU, when the European Union’s new Pay Equity Directive formally approves the text, the member countries will have three years to incorporate the Directive into national laws, and then all companies with more than 250 employees will be obliged to annually do pay equity audits and reports. Achieving pay transparency may not be that straightforward for companies that operate in several countries with differing laws and regulations. New, 2023 data by SHRM shows that among more than 1,300 human resources professionals surveyed, 42% of their organizations or more operate in a location that requires job postings to include pay ranges. SHRM survey also reveals just how much employees appreciate pay transparency. According to the survey, “73% of U.S. workers are more likely to trust organizations that provide pay ranges, and about the same number are less interested in applying to jobs without pay ranges listed. “ Additionally, according to Talent.com’s report, a large majority of job seekers, 98%, want to know a position’s salary before applying, and 77% state that salary is a top consideration during their job search. It is not surprising then, that 85% of job seekers are more likely to apply for a job that lists a salary range. The same transparency expectations from employers apply to companies’ Total Rewards offering, including the Recognition and Rewards programs, and in the following sections, we’ll provide a few tips on how to achieve more equity in a company’s Recognition and Rewards programs. How To Achieve Equity in Employee Rewards Here are a few tips to help you set your recognition and rewards system to promote equity in a workplace. 1. Allow access to employees’ personalized Total Rewards offering Visibility is what’s called for. For one, employees need to see the full picture of what companies spend on them beyond the base pay – the total value of their work, including salary, benefits, bonuses, and other perks. Secondly, being able to see one’s total rewards offering allows employees access to tax benefits and deductions and the freedom to control their finances and plan their earnings. Gartner surveyed more than 3,200 employees in May 2022 and revealed that 43% of employees discuss their pay with colleagues in the same role. At the same time, 45% of employees consult third-party pay sites at least once a year. The survey also found that less than 1/3 of employees are aware that their organization is prioritizing pay equity. When employees have access to this information, it reduces the potential for pay disparities or inequities within the organization. By knowing what their peers are earning and receiving in terms of rewards, employees can better assess whether they are being fairly compensated. Luckily, many Recognition and Rewards vendors provide Total Rewards portals to be personalized and accessible to every employee. Guadagni claims that less than half, 38%, of the employees Gartner surveyed report that they understand how their pay is determined. Guadagni further claims that: “When organizations educate employees about how pay is determined, employee trust in the organization increases by 10% and pay equity perceptions increase by 11%.” 2. Establish clear and transparent reward systems The first step toward achieving equity in employee rewards is to establish clear and transparent reward systems. Clearly define the criteria and metrics used to determine rewards and make them accessible to all employees. This ensures that everyone understands how rewards are allocated and helps eliminate perceptions of bias or favoritism. This includes: defining the objectives and establishing clear metrics: clearly outlining the goals and objectives you want to achieve with your reward system. This could include encouraging high performance, promoting teamwork, or recognizing exceptional achievements. aligning recognition and rewards with goals: ensure that the rewards you offer are directly tied to the desired outcomes and behaviors. This alignment helps create a sense of purpose and motivates employees to work towards those goals. communicating the criteria: clearly communicate the criteria for earning rewards to all employees. Make sure they understand what specific actions, achievements, or behaviors are recognized and rewarded. This transparency helps create a fair and level playing field. involving employees in the process: seek input and feedback from employees when designing the reward system. This involvement increases transparency and allows for greater employee buy-in and satisfaction. offering a variety of rewards: consider a range of rewards to cater to different employee preferences and motivations. These can include financial incentives, recognition and appreciation, career development opportunities, or non-monetary perks. providing regular feedback: establish a system for providing timely and constructive feedback to employees on their performance. This feedback should be tied to the R&R system, highlighting progress towards goals and areas for improvement. monitoring: continuously monitor the effectiveness of your reward system and make adjustments as needed. Regularly review the system’s impact on employee motivation, performance, and overall organizational objectives. ensuring consistency and fairness: apply the reward system consistently and fairly across all employees. Avoid favoritism or bias, and address any concerns or grievances promptly and transparently. celebrating success: publicly acknowledge and celebrate the achievements of employees who have earned rewards. This recognition helps reinforce positive behaviors and fosters a culture of appreciation and excellence. 3. Use objective performance metrics Establish clear recognition and rewards metrics, such as sales performance metrics, customer feedback, peer recognition etc. The metrics should be objective, easily understood, and consistently applied across the organization. A good example, depending on the objective performance, metrics provide a fair and impartial basis for evaluating employee contributions. Establish key performance indicators (KPIs) that align with the organization’s goals and values. These metrics should be measurable, consistent, and applied consistently across all employees, regardless of their position or background. 4. Recognize and reward different types of contributions Equity in employee rewards means acknowledging and rewarding various types of contributions. Not all contributions can be measured solely through quantitative metrics. Recognize and reward employees for their efforts, innovation, teamwork, and leadership skills. Create a comprehensive system that values both individual and collective contributions, ensuring that all employees have an equal opportunity to be recognized and rewarded. 5. Regularly review and adjust reward systems To ensure ongoing equity, organizations should regularly review and adjust their reward systems. As the business landscape and employee expectations evolve, it is essential to revisit and refine the reward criteria. Solicit feedback from employees and consider their suggestions for improvement. This iterative process allows organizations to stay responsive and adapt to changing needs. 6. Train managers on equity and unconscious bias Managers play a pivotal role in the implementation of equitable recognition and reward systems. Provide training and resources to managers to enhance their understanding of equity, unconscious bias, and the importance of fair rewards. Educate them on how their decisions and behaviors can influence perceptions of fairness and the overall employee experience. 7. Encourage employee participation and feedback Employees should feel empowered to provide feedback and suggestions regarding the recognition and reward system. Encourage open communication channels and anonymous feedback mechanisms to ensure that all employees feel comfortable expressing their opinions. This fosters a sense of ownership and helps identify potential inequities or areas for improvement. 8. Regularly communicate and celebrate achievements Transparent communication is vital for promoting equity in employee rewards. Regularly communicate the rationale behind reward decisions and highlight the achievements of individuals and teams. Celebrate success stories throughout the organization to ensure that recognition is visible and accessible to everyone. 9. Address pay equity Pay equity is a fundamental aspect of employee rewards. Conduct regular audits to identify and address any gender, race, or other disparities in compensation. Implement fair and transparent salary structures and policies, ensuring that employees receive equitable pay for comparable work and experience. A July 2022 Gartner survey of 104 total rewards leaders found that 84% are conducting pay equity audits at least annually. As more and more companies become transparent about pay equity, beware about the rising compensation gap that occurs across different segments of the workforce. Keep in mind that in inflation, the new talent often gets paid more than employees who have stayed longer in a company, which also breeds resentment among employees. A recent Gartner survey informs that every fifth organization shares salary ranges for roles. This makes it evident to existing employees that new hires are being paid more. Gartner research further reveals that 35% of managers and a quarter of nonmanagers report that new hires are making the most money in their organization, leading to internal friction. Conclusion Achieving equity in employee rewards is an ongoing commitment that requires proactive measures and continuous evaluation. By establishing clear and transparent reward systems, utilizing objective performance metrics, recognizing diverse contributions, and fostering an inclusive culture, organizations can create an environment where all employees feel valued and fairly rewarded for their efforts. Embracing equity in rewards not only enhances employee satisfaction and retention but also cultivates a strong foundation for long-term organizational success. Custom Awards for Unique Culture and Needs Interested to learn how to improve your Total Rewards catalog? Book a call with our experts! Book a Demo
