Every day there’s a new headline about the impact of rising inflation. And as the cost of living soars, figures show that wages are falling in real terms. Whilst not all companies will be in a position to raise the salaries of their entire workforce at once, every employer has a responsibility to create fair and equal access to opportunities and pay. The cost of living crisis will be exacerbated if fairer hiring processes and salary transparency aren’t rolled out to level the playing field across the board, argues Khyati Sundaram.
We already know that withholding information about salaries on job adverts enables employers to offer different people different salaries for doing the same job. This perpetuates pre-existing wage gaps that are more reflective of human bias than a candidate’s level of competency.
To put this into context, research shows that female applicants who are typically less likely to self-promote are likely to be offered a lower salary than a male applicant who self-advocates for a higher wage. According to the latest gender pay gap figures, female workers are still only paid an average 90p for every £1 earnt by their male counterparts.
Meanwhile, the working class pay gap currently stands at over 12 percent at the Big Four alone, the UK’s disability pay gap is almost 14 percent- and whilst ethnicity pay gap reporting isn’t mandatory, addressing race inequality in the labour market could boost the UK economy by an estimated £24 billion a year.
 |
Get our essential daily HR news and updates. |
In a world where gender, class, race and ability dictate our opportunities, finding ways to make pay equitable and improve peoples’ financial health during the worst cost of living crisis in decades has never been more urgent.
So how do we do it?
Equal pay starts with transparency from employers. New York City is already in the process of bringing in a Pay Transparency Law specifically to close pay gaps. And whilst the UK is currently running a pilot scheme of a similar nature, salary transparency should be standard, not a case of “opting-in”.
This is because evidence shows that when women are made aware of salaries up front, they feel empowered and are more likely to negotiate for higher pay. The same goes for other marginalised groups who have historically been paid less for equal work. To close gender pay gaps and support everyone through this crisis, we must mandate that all companies openly state the compensation being offered for both part-time, full-time and temporary roles.
Salary transparency
Employers must also make it clear to candidates that they are not obliged to disclose their salary history at any point during the application process. For those whose current wage doesn’t reflect the compensation they deserve, disclosing a previous salary to a new employer could hinder financial progression. In a recent survey, 61 percent of women who were asked about their salary history during an application process said it damaged their confidence to negotiate for better pay. Also, 58 percent of those asked felt that they received a lower salary as a result.
In fact, only a quarter of the workforce believes that their pay should be dictated by their past salary. This is compared to 80 percent of workers who believe their skills should determine their pay. Our work at Applied confirms that skills are the most accurate predictor of performance – and should therefore be the focal point of fair and equitable hiring processes that also publicise compensation packages as a matter of course.
Skills-based assessments
Alongside pay transparency, using skills-based assessments to root out human bias is a sure fire way of championing talent that traditional hiring processes overlook, whilst finding the best candidate for your role. In a recent study we found that when CVs were replaced with role-relevant skills tests, the number of women hired into senior roles increased by a staggering 70 percent. And, the number of successful minority hires increased fourfold.
The figures speak for themselves. So it’s time we held companies accountable for hiring, paying and promoting all staff fairly. We can’t fix the cost of living crisis overnight; but through fairer and more transparent people practices, we can ensure that marginalised groups aren’t disproportionately affected by the squeeze. Against the backdrop of rising inflation and huge pressure on peoples’ personal finances, salary transparency – if not a real terms pay rise – is the very least the workforce deserves.
Khyati Sundaram is the CEO of Applied: a behavioural science-backed tool which helps companies hire fairly and without bias. Before joining Applied, Khyati co-founded her own company and also worked in investment banking with JP Morgan and RBS. She also holds an MSc in Economics from the London School of Economics, as well as an MBA from the London School of Business.
- Khyati Sundaram
- Khyati Sundaram
- Khyati Sundaram
- Khyati Sundaram
