Less than one-third of employees believe they are paid fairly, and one of the main drivers of this perception is their general distrust of their organization, not necessarily the compensation level itself, according to new research released this week.
The Gartner HR survey of 3,523 employees also found that 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.
“Employees’ sensitivity to perceived pay gaps is being exacerbated by today’s economic conditions, including rising inflation and the hot labor market, which is causing a shift in compensation between tenured employees and new hires,” said Tony Guadagni, senior principal in the Gartner HR practice.
“Employee perceptions of pay equity aren’t rooted in compensation,” said Guadagni. “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.”
Factors that erode organizational trust include poor culture and inclusivity, poor work-life harmonization and unfair experiences, he said. Therefore, to increase employee perceptions of pay, HR must rebuild employees’ trust in the organization, he said.
Most employees currently receive little pay information directly from their organization. Another Gartner survey of more than 3,200 employees in May 2022 found that nearly 43% of employees discuss their pay with colleagues in the same role, while 45% of employees consult third-party pay sites at least once a year. In fact, the same survey found that less than one-third of employees are aware that their organization is prioritizing pay equity.
Communicating about pay equity builds organizational trust and improves employee perceptions, as does education about pay processes.
“Only 38% of the employees we surveyed report that they understand how their pay is determined,” said Guadagni. “When organizations educate employees about how pay is determined, employee trust in the organization increases by 10% and pay equity perceptions increase by 11%.”
Previous Gartner research showed most organizations are taking steps to close pay gaps and that senior leaders say pay equity is a high priority. However, decision-makers deprioritize pay equity in practice, especially when hiring critical talent.
