Closing the pay gap with crowdsourced pay decisions

Employment & Skills | Reports

Written by Derek Irvine, senior VP, client strategy & consulting, Globoforce

The WorkHuman Analytics Research Institute (WARI) recently issued the results of its latest International Employee Survey investigating what 3,600 employees from across the UK, Ireland and North America, think about their employers.

The results indicate that staff are becoming somewhat jaded by traditional ‘command-and-control’ management structures, which they blame for disparities in the workplace, particularly around pay. Instead, employees want to work for more open and transparent organisations. As part of this, they are increasingly open to the idea of crowdsourced pay decisions, where their co-workers – and not just their bosses – have influence over how they are rewarded.

Social movements impacting the workplace

Social movements like #TimesUp and #MeToo are prompting employees to question whether they work for fair and equitable organisations. By giving employees a voice and making it acceptable to call out bad and unfair working practices, these movements have exposed traditional top-down management cultures as biased and out-of-step.

At the same time, employment rates are amongst the highest they have been for years. With more employment opportunities on offer, staff can afford to be a little pickier about where they work and who they work for. ‘Put up or shut up’ are no longer the only available options.

Secretive pay reviews fuel inequality

Compensation is a topic usually only discussed in private. Indeed, until relatively recently, some organisations still considered it a sackable offense for an employee to discuss their salary with a colleague. Gender pay gap reporting is of course changing attitudes and behaviours, but there is still much to do.

For example, the WARI research found that 39 percent of women believe they are unfairly compensated. For men, this figure was lower at 30 percent. Annual bonuses exacerbate these inequalities. UK-based men in the survey were three times more likely than UK-based women to receive a bonus in excess of £5,000.

The role of crowdsourced pay

Crowdsourced variable pay is a relatively simple way to make pay decisions more equitable. It requires a small portion of the overall payroll budget to be allocated to crowdsourced methods, such as social recognition, where employees are compensated according to the feedback of their peers as well as their managers.

It works by allowing employees to give each other micro-bonuses in the form of points that can be swapped for merchandise or gifts, accompanied by a statement of why the recipient merits the bonus.

This simple system of recognition is gratifying to both the giver and to the recipient. Co-workers know who the top performers within their teams are; this process helps ensure these people (who aren’t always visible to management) are appropriately recompensed and acknowledged.

Good for employers as well as employees

Crowdsourced pay doesn’t just make recipients feel good, it also has significant benefits for organisations. Well-motivated, fairly rewarded employees are more productive. By way of example, this year’s WARI survey included the question “Would you work harder if you received monetary awards crowdsourced from your colleagues?”

A sizeable majority of younger workers said they would. A massive 73 percent of 18 to 24-year-olds answered ‘yes’ to the question, while 71 percent of workers between the ages of 25 and 34 also agreed. Support declined with age, but the figure was still as high as 61 percent amongst 35 to 44-year-olds.

Crucially, adding crowdsourced pay to compensation structures doesn’t mean increasing a company’s total payroll budget. This type of pay can be self-funded through the re-distribution of other variable pay budgets such as bonuses, incentives and other pots of money where the ROI is not as clear cut. This makes the concept easier to ‘sell’ to senior management.

Crowdsourced pay is what employees – particularly younger employees – want; it also offers organisations a way to redress pay inequalities and boost their overall productivity. It does, however, require the correct organisational mindset. It needs to be implemented as part of a wider strategy that recognises the input and contributions of all staff and that is fair to everyone, not just a certain type of employee.

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