A connection that's 'easy to miss' may lead to talent exodus at work, report warns
HR professionals are missing how fair pay perception is affecting trust in the workplace, according to a new report, which warned employers of its potential consequences for the workforce.
The latest research from Salary.com revealed the strong association between fair pay perception and workplace trust.
It found that 36.4% of employees who rate their pay as unfair reported declining trust in their employer over the past year.
This is more than five times the 6.6% of employees who feel they are fairly paid at work, according to the report.
Amy Dwyer, CHRO at Salary.com, said their findings show that pay fairness and trust are not two separate, unrelated programs.
"Our latest research shows they are part of the same conversation," Dwyer said.
The report further noted that the findings reflect an association rather than a causal claim, pointing out that of all the respondents who feel unfairly paid, 48.1% are in the negative trust territory while just 19.1% reported positive trust.
On the other hand, among employees who feel fairly paid, 77.5% reported positive trust, including 30.1% who trusted their employers more.
'Easy-to-miss' connection
Dwyer, however, noted that employers are easily missing the connection between fair pay perception and workplace trust amid a quiet labour market.
"That connection is easy to miss right now," she said.
According to the report, 44% of HR professionals cannot tell whether their organisation improved trust with its workforce over the past year.
Compensation management professionals, in particular, are more likely to be unsure (59%).
Even more concerning is that employers underestimate the size of the unhappy minority, as only 9% of them expected employees to feel dissatisfied with their pay, while the actual figure stands at 16.6%.
Dwyer attributed the lack of employer insight to the quiet labour market, which she said employers might be mistaking for employee loyalty.
"But employees who perceive their pay as unfair are already losing trust," she warned. "When hiring picks back up, they may be the first to walk."
What can HR leaders do?
Dwyer said the quiet labour market is the perfect window for HR leaders to improve employees' perception of their pay.
"Most organisations I talk to are not underpaying people on purpose, and plenty of them cannot move payroll much at all right now," the CHRO said.
"That shouldn't be the end of the conversation. Employees rate fairness on what they can see and what someone can explain to them."
According to the report, there are two levers that employers can use to improve pay perception. They include improving managers' skills on compensation conversations and equipping them with "real material" on pay, restructuring, and reasoning behind these decisions.
Another approach is improving pay transparency and ensuring that managers are able to explain where and how organisations landed on the "transparency" spectrum.
"The market is holding its breath. The organisations that use this window to improve trust and pay fairness will be better positioned when it exhales," Dwyer said.
