How to Improve Workplace DEI Through Payroll Management 

Diversity, equity, and inclusion (DE&I) are near the top of the list of many issues that concern employees today. ADP’s People at Work study reports that 76% of employees would think about finding a new job if they discovered an unfair gender pay gap or learned that their company doesn’t have a DE&I policy. It’s a particularly critical concern for Gen Z, who are set to make up over half the global workforce by 2030.

This places DE&I as a top concern for employers too. Many businesses are publishing policy statements on the topic, but practical changes are far harder to implement. McKinsey observes that UK companies struggle to simultaneously achieve gender and ethnic diversity.

Moreover, many women in tech feel, and sometimes are told directly, that they are token “diversity hires”. Others talk about not being taken seriously, even when hired or promoted on their own merits.

HR professionals are taking all kinds of steps to address DE&I, like examining recruitment policies and wording recruitment ads in ways that appeal to women, members of underrepresented ethnicities, and disadvantaged groups. Many workplaces are investing in professional development for BAME and female employees and cultivating welcoming workspaces.

But pay gaps remain a significant problem, placing payroll front and center for DE&I issues.

Pay equality

Understandably, pay equity is still a primary issue in the quest for workplace equality. The pay gap is narrowing, but it indeed hasn’t disappeared. A survey by ADP found that 60% of women think that they are underpaid for their roles, compared with 46% of men, and significantly more women than men are unhappy with the pay they receive.

Part of the solution is to commit to pay equality, but that’s only possible when workplaces have accurate data about pay equality. Staying organized with payroll processes results in more reliable data, which can be used for pay reviews and to check pay disparities.

Automation also helps ensure that employees receive all the pay they are entitled to and there aren’t “hidden” pay gaps. Often, overall compensation includes disparate aspects like bonuses, overtime, and paid leave. If pay is not calculated and paid in full and on time, the real-world experience of take-home pay could be very different.

For example, if 5% of an employee’s pay is due to overtime, and manual payroll processes mean that overtime calculations consistently lag two or three months behind regular salary payments, the employee might not be receiving the full pay they expect, even if their compensation package looks great on paper.

Pay transparency

Without transparency, it’s impossible to achieve real equality, so this goes hand in hand with the previous point. Transparency matters a lot to employees, with a recent report noting that job ads that include salary details attract six times as many applicants, while increased pay transparency does effectively narrow the gender pay gap.

Transparency also promotes trust in the company, which makes employees feel safe, secure, and included — the ultimate goal behind DE&I policies.

An awareness of this lies behind the EU’s Pay Transparency Directive. While the UK doesn’t yet have similar legislation, companies that stay ahead of the game could have an edge in attracting top talent. Given that remote work is commonplace, candidates could choose to work for EU companies with more transparent payroll processes.

Conversely, companies with opaque, confusing, and inefficient payroll processes lack transparency into who receives what compensation in actual terms. That’s particularly problematic in companies where employees commonly work shifts, overtime, and/or on a contract basis, making it difficult to compare real-world compensation. These organizations can also use automation to make payroll more reliable, trusted, and transparent.

Pay flexibility

Flexibility is essential to everyone nowadays, but it’s particularly crucial for women.

Women are still more likely to bear the majority of the childcare and elder care burden. In some ethnic minorities, such as Bangladeshi and Pakistani communities, families still expect that women will care for extended family members.

When people think about flexibility in the workplace, working hours and remote work options are the first things that come to mind, but payroll and compensation play a key role. Streamlined payroll management practices make it far easier for companies to support flex work, because it lightens the burden of calculating compensation for irregular working hours.

Automated payroll also enables companies to support flexible payment arrangements, like if an employee prefers to be paid weekly or bi-weekly rather than monthly for the sake of easier budgeting. This way, the company can accept such requests without worrying about the payroll team getting overwhelmed.

Pay reliability

Getting paid on time and in full isn’t often mentioned as a DE&I issue, but it’s worth pointing out in this context. According to LinkedIn’s Future of Recruiting, compensation remains the top priority for jobseekers, despite ongoing concern for work-life balance and flexible working arrangements.

Employees from middle-class backgrounds are more likely to have enough financial stability that they won’t worry if the pay is a day late or overtime payments come through a couple of months down the road. But a delayed paycheque could be disastrous for those living under financial stress.

BAME employees and single-parent families, which women more often head than men, make up a disproportionate percentage of employees who desperately need to be paid bang on time. They can’t afford to wait for even a portion of their expected income.

This is where efficient, automated payroll processes come in, guaranteeing that employees receive their full pay when they expect it. With this kind of assurance, employees who are facing financial stress can take overtime or extra shifts with the confidence that they’ll be paid this month and not four months down the road when they finally finish their calculations.

Payroll can add to your DE&I efforts

For as long as pay gaps continue to dominate DE&I conversations, payroll will play a significant role in driving equality and inclusion in the workplace. Impressive statements and revised policies have their place, but taking practical steps to improve payroll processes and care for every employee’s financial needs speaks louder than a thousand announcements.

By Sabrina Castiglione, Chief Operations Officer, Pento.

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