I was once asked for my favourite HR guru. I said Karl Marx. Not because Marx thought capitalism was the enemy, but because he provided a simple description of the relationship between employee and employer. He argued an employee sells their labour [time] and the employer makes use of the labour to generate something that is sold at a higher value than what the employee was paid.
Today this dynamic is often expressed as the compensation: income ratio. In most companies the compensation:income ratio is carefully managed by finance functions and HR reward teams and is the foundation of budget setting. Such management is dependent on compensation data and the enforcement of practices and policies.
During the global financial crisis HR professionals working in the finance sector were challenged as to how HR had allowed the development of cultures that contributed to the crisis. The function’s muted response was that its focus was on supporting organisations to achieve their strategies to make money, and that the underlying cultures were to that goal. Perhaps HR was part of the problem.
When it comes to the gender pay gap we need to ask whether HR has been as much part of the problem as part of the solution. Many HRDs have told me that they haven’t been completing equal pay audits because they are concerned the data will be disclosed to staff. The mindset of some working in HR is orientated first to protect organisations from litigation and second to protect the existing compensation:income ratio and budget, rather than striving to ensure that there is no pay gap.
The gender pay gap is a product of practices that have been allowed to develop over time. Where disadvantages arise from institutional practices the duty is on organisations to provide a rebalance.
It seems rare that in-house diversity experts have full access to organisational compensation data. So, are there HR resources within business with a competing agenda – some determined to maintain the status quo and some focused on pursuing gender equality? The potential parallels between the financial crisis and gender pay gap concerning HR ethics are evident.
To resolve the pay gap no new techniques are needed. The HR profession is well versed in job analysis, salary grading, salary bands, performance measurement, and talent assessment. And the data is available. HR functions need little more than the right mindset.
We have heard a lot recently about HR as a commercial business partner. However, a vital role for HR is to ensure there is humanity in the workplace. Protection of the compensation:income ratio is important, but so too is ensuring equal pay.
The HR profession would benefit from reflecting more on the lessons of the financial crisis. Those adopting a myopic position to protect organisations against litigation or to ringfence budgets may need to reflect on professional ethics. There is a specific duty for HR to contribute to maintaining the ethical compass of a business. Management targets must not be achieved at the cost of having unequal pay practices.
We should ask ourselves a simple question: “Can I make my organisation’s compensation data transparent to the workforce without undue risk of litigation?” If the answer is no then who is accountable? And are you part of the solution or the problem?
The pursuit of prosperity is not the enemy of diversity – but where practices are unfettered perhaps Marx might argue that it is...
Robert Potter is master of the Guild of Human Resource Professionals
