is the gender pay gap hurting your workforce’s performance?

Follow these tips to mitigate the real and perceived unfairness of your compensation practices.

Across the world, women make just a fraction of men working in the same roles. This shouldn’t come as a surprise to anyone. What may be more revealing is that even in industrialized markets where a conscious effort is underway to correct the problem, the disparity isn’t likely to go away soon. According to the World Economic Forum, it would take 202 years to close the economic gap between men and women given the current glacial pace of change.

With institutionalized barriers continuing to stagnate the progress of female workers around the world, employers should view the issue not only as a question of fairness but also workplace engagement and productivity. After all, workers who feel they are undervalued and discriminated can lead to low morale, decreased motivation, reduced output and a host of other problems.

The economics of the pay gap are considerable. According to the Quarterly Journal of Economics, one study found that worker output and attendance are lower when a perception of unfair pay practices occurs. In one study conducted by MIT, output was lower by as much as 52% when workers are aware of a disparity in pay. 

One of the biggest challenges to shrinking the pay gap is that the problem is so ingrained across economies everywhere that many workers and employers have just come to accept the inequality. In the U.S., the Pew Research Center estimates that women make only about 85% of what men earn. According to the World Economic Forum, the largest gap is in Syria and Iraq, where women make just 30%. In Germany, women earn 21% less and 30% less in the U.K. In no market have women reached parity with men. Across the EU, according to the European Commission, the average gap is about 16%.

Another barrier to overcoming the pay gap is that many workers refuse to believe such a problem exists. A survey conducted by Time Magazine in March 2019 showed that nearly half of American men believe the gender pay gap is fictitious invented for political purposes and one-quarter of men say the disparity is fake news. There is also debate over whether existing regulations aimed at reducing the gaps – such as the Equality Act 2010 in the U.K. – sufficiently address the problem.

Whether the cause is deeply rooted or is an issue of perception or awareness, the impact is all the same: women who are discriminated in the workplace tend to be less engaged, are less loyal to their organizations and are more likely to seek employment elsewhere. This is especially concerning during this period of growing talent scarcity, which is leading to many employers to compete more aggressively for critical skill sets.

A female worker that feels less valued because of the pay gap will likely underperform, since there is little incentive for her to go the extra mile. And the resentment wouldn’t be isolated since companies that have institutionalized unfair practices or fail to stop them will likely see the impact across the entire workforce. Not only is this a bad situation for existing employees but it could also have an impact on the company’s employer brand and attractiveness as an employer.

Actions to take

So how can your business better address disparities that may exist in your compensation policies? How can you enhance employee engagement, especially among female team members, through fair and equitable pay? There are some fundamental steps you can take to ensure your policies and practices do help reduce existing disparities and prevent future occurrences.

Measure the current state

Do you have a comprehensive view of the gender gap that may currently exist in your organization? Do women have equal opportunity to earn the same salary and bonus levels as men? Are there structural difficulties for female workers to reach the same pay grade as male counterparts? These are important questions to answer before you can begin to develop a solution. 

Investigate root causes

If systemic issues exist, investigate why they are in place. Is there a legacy compensation practice that unfairly treats workers? Do women receive fewer promotions? Have line managers been trained to ensure they are not biased in their assessment of performance? Until you know what’s causing the problem, you can’t develop a corrective course.

Gather employee feedback

Even if you don’t find evidence of actual pay disparity, is there a perception of one? If women workers believe they are less valued than male ones, this can also lead to workforce dissatisfaction. While many companies do have a pay gap issue, those that have rectified it may still suffer from their past reputation. By gauging the perception of your workforce and reinforcing the idea that your company is actively addressing the problem, you can improve engagement and productivity.

Offer mentoring and family support

Because women more often than men have childcare and other family obligations, they are often perceived as less committed to their careers, resulting in fewer advancement opportunities and pay raise. In truth, they may simply need more employer support around scheduling and leave. At the same time, they may need guidance around how to move up in their career so make sure your business account for their needs.

Raise awareness throughout the company

One of the most impactful steps you can take is proactively address the issue with both men and women. Although it happens less often, some organizations have found that male workers received lower pay than women. By raising awareness throughout the company, you can help managers view their employees in the same light and help them realize the dangers of unfair wage practices.

Despite a dim outlook for fixing the gender pay gap in the near future, your company can do its part now by undertaking some of the steps mentioned above. As with any monumental shift in societal behaviors, every small step contributes to a greater cause.