Your approach to pay speaks louder than words
PwC's financial services fair pay survey
Flatlining incomes and rising inequality are shining an unwelcome spotlight on industries seen to be exacerbating the problem. Financial services is one of the sectors in the firing line. The rewards enjoyed by senior executives and high earners within financial services have come to epitomise what many people see as an industry that’s cut off from everyday life – ‘Wall Street versus Main Street.’ And this spotlight is being intensified by new gender and pay ratio reporting.
Although many financial service organisations have been working to reshape their cultures, deliver customer outcomes and publicise their contributions to society, public anger over pay is undermining the industry’s efforts to reconnect with society.
Yet the focus on pay presents an opportunity for your financial service organisation. Putting fairness at the heart of your pay policies would visibly demonstrate that you’re conscious of inequality and its impact – that you’re listening to what stakeholders are saying and you’re prepared to align with their values. Ultimately, embracing fair pay would establish that you’re prepared to ‘walk the talk’ in reshaping your culture, organisational purpose and performance objectives.
The risk of inaction is being forced to respond to a fairness agenda set by hostile interest groups. This could include allowing ‘fairness’ to become synonymous with ‘equality,’ which in turn could lead to arbitrary caps on salaries or pay ratios.
Global increase in fair pay regulation
Questions remain over whether enough financial services organisations are moving far or fast enough to set their own agenda on fairness, rather than having it shaped externally by regulation.
As the disclosure demands and the potential backlash increase, there is a danger that your company will be judged by a definition of fairness set by others or by how the disclosures are framed. It’s important to develop a clear view of what dimensions of fairness are relevant to your business and how you communicate them. Is it about closing the gap between top and bottom? Or making sure pay is always nondiscriminatory and justified by performance and contribution? Is fairness defined by the market rate, or are there minimum standards that dictate a living wage should be paid regardless? The answers will be different for different organisations and need to be supported by clear and proactive fairness reporting, which explains how fairness is viewed and measured, sets out plans to achieve these aims and tracks progress against objectives.
The risk opened up by a reactive, minimal compliance approach is that a company will be held hostage to a one-dimensional view of pay and by extension its fairness philosophy will be based on its pay ratio and gender pay gap alone. This can hurt a company’s reputation and limit its ability to keep and attract talent.
Develop the fairness principles that are right for your organisation
Identify the principles of fairness that are most relevant to your business, workforce and culture. How does fair pay align with your purpose and values, for example? What behaviour and performance do you want your reward system to promote? How do you ensure your staff have a decent standard of living? What do you have to do to be seen as a caring organisation?
To be relevant, your principles should clearly reflect the economic realities of your business. This includes not only competing against peers for talent and offering appropriate incentives, but also ensuring equal opportunities for traditionally underpaid and underrepresented groups. Your board should then approve these principles to show their importance.
Determine what your employees want and, just as importantly, what you want from them
Clearly, it’s important to look at what employees expect as the ‘just desert’ for their contribution. Ask people what fairness means to them and use the insights to refine your principles.
Their views are bound to differ, so rather than a one-size-fits-all approach, it’s important to make maximum use of data and analytics to gain a real understanding of their perspectives.
This is just the start. Although employee perspectives should be taken into account, you can’t simply mould your approach around them. Just as you need to reflect their aspirations, they should live up to the values and culture you want to promote. For example, if the attitudes of certain employees – including their incentive expectations and underlying values/behaviour – conflict with this, you must ask yourself whether they belong in your organisation and what kind of people should replace them.
Translate your principles into actions
Fairness principles come alive through their expression in tangible people policies – for example, the adoption of a living wage, active steps to tackle pay gaps and incentives that encourage priorities such as putting customers first. Our report outlines some of the concrete policy options that can support your board-approved fairness principles.
Judge whether your organisation lives up to your principles
Take a hard look at how your organisation measures up against your principles.
The development, measurement and monitoring of metrics in areas such as gender pay can improve your ability to drive forward priorities, track progress and identify areas in need of active intervention.
Even if you think you’re abiding by your key priorities, take stock anyway; they often get lost in times of disruption and growth, and it’s common to have blind spots. An honest inspection of the data can shed light on the real picture.
Tell your story
Transparency is a big part of making fairness principles work. That means engaging with your employees, so they know how and why they’re being compensated, not just with pay, but also with benefits and other rewards. Telling your story also means going beyond the basics of statutory disclosure by outlining your principles, policies and progress against objectives.
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