In any industry or environment, pay equity is crucial. As well as presenting an ethical concern, pay imbalances can expose your business to legal action, affect your recruitment and retention, and significantly dent your bottom line.
If your team is globally dispersed, this is especially true, as you must also navigate diverse cultures, economies, and legal frameworks.
In this article, we'll explain how you can avoid this, and ensure pay equity for your global team. We'll explore the importance of pay equity in more depth, address the challenges of pay gaps in global teams, and offer actionable strategies to promote pay equity and ensure its effectiveness.
So let's jump straight in.
What is pay equity?
Across the world, pay equity is a fundamental principle of fair labor practices. It guarantees that every member of your team is paid based on their value, and not on other factors such as gender, race, ethnicity, or nationality.
Why does pay equity matter for global teams?
Achieving pay equity is especially challenging for global teams, as there are so many variables across different borders. It's worth getting it right, though, for the following reasons:
It fosters a positive work culture
Pay equity creates a work environment where employees feel valued, respected, and fairly compensated for their contributions. This leads to higher job satisfaction, increased employee engagement, and a stronger sense of belonging, all of which contribute to a positive work culture.
It ensures compliance with local labor laws
Many countries have strict labor laws that prohibit pay discrimination based on factors such as gender, race, ethnicity, or nationality. In the US, for instance, organizations are subject to the federal Equal Pay for Equal Work Act, while companies in the UK must abide by the Equality Act.
If your business fails to comply with these laws, you could face serious consequences including, fines, penalties, reputational damage, and a loss of trust among employees and stakeholders.
It helps attract and retain top talent
Pay equity is a critical factor in attracting and keeping top talent. When employees perceive fair and equitable compensation practices, they are more likely to be motivated, engaged, and loyal to your organization. Indeed, according to a recent study by Syndio, companies that implement pay equity are 5x more likely to retain their best talent.
This not only reduces employee turnover but also enhances your organization's ability to attract and hire the best candidates for the job, fostering a cyclical culture of excellence and high performance.
Addressing pay gaps in global teams
To achieve pay equity, you must first address existing pay gaps in your organization. To do this, you need to identify the root causes of the gaps, which may include factors such as gender, race, ethnicity, nationality, or location.
A payroll audit can help identify and address any discrepancies in your compensation approach, and is a good starting point.
It's also recommended to conduct training and education on pay equity, either internally or through external experts. This can help raise awareness and understanding of the issue, and promote a culture of transparency and accountability.
By taking these first steps, your organization can work toward ending pay gaps (or potential pay gaps) and creating a more equitable and inclusive work environment for your global team.
Pay equity review checklist:
Conduct a pay equity audit. This will help you identify any pay disparities between employees in different countries or regions.
Review your compensation policies and practices. Make sure that they are based on objective criteria, such as job title, experience, and performance, and that they do not discriminate on the basis of gender, race, ethnicity, nationality, or location.
Provide training and education on pay equity. This will provide context and ensure that everyone is informed on the importance and effects of pay equity.
Promote a culture of transparency and accountability. Encourage employees to speak up if they believe they are being paid unfairly, and take action to address any reports of pay discrimination.
A note on location-based pay
It's important to note that location-based pay, calculated using cost-of-living adjustments and market rate benchmarking, is not necessarily inequitable.
For example, the expected salary for a software engineer role in London may be significantly higher than for the same role in Bucharest. This is because the cost of living and market rates are much higher in London. However, it's important to calculate the ratio fairly, using accurate and accepted data (usually from independent third-party experts).
To learn more about how to fairly calculate compensation for your global team, check out our in-depth, actionable guide .
Tips for promoting pay equity in global teams
After your initial review, there are several things you can do to ensure that new pay gaps don't appear (or reappear).
Establish clear and consistent compensation criteria
Moving forward, this is essential for ensuring pay equity. By establishing a detailed framework, you can eradicate pay gap issues at the root and avoid future potential inequities. Your criteria should be based on reliable data and objective factors such as job role, experience, and performance, and should not be influenced by factors such as gender, race, or nationality.
By establishing clear and objective compensation criteria, you can ensure that all your employees are evaluated and compensated based on their contributions to the organization, regardless of their background or location.
Conduct regular payroll audits
As mentioned, a payroll audit is a good starting point for achieving pay equity. It's highly advisable to make a habit of performing these audits semi-regularly, as they can help make sure new issues don't arise (while also ensuring that your employees are being paid properly).
Each audit should compare the compensation of employees in similar roles, taking into account factors such as experience, performance, and location. By conducting regular pay audits, you can proactively identify and address any pay disparities, ensuring that all employees are compensated fairly.
Enable internal growth
Provide opportunities for professional development and advancement, as this is crucial for achieving pay equity. It allows employees to develop the skills and knowledge necessary for salary growth, and boosts the skillset of your workforce.
Inform and educate
Encouraging ongoing discussions about pay and pay equity issues. This can be done through forums, workshops, or one-on-one conversations, and can feature internal and external speakers.
Regularly review and update your pay equity policies and practices
Achieving pay equity is an ongoing process, and it is important to regularly review and update your policies and practices to ensure that they remain effective. By staying proactive and continuously improving your pay equity efforts, you can create a fair and equitable work environment for your global teams.
Managing pay equity with Remote
Knowing what to pay your people in different locations can be challenging, and require extensive research.
When you hire through Remote, we can help you put together a competitive offer (including tailored local benefits ) that is fully compliant with local employment and wage laws.
Our payroll platform also makes it quick and easy to review your salary data, and identify potential gaps and areas of concern.
