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Only half of employees think they are fairly paid

?Only half (51%) of permanent employees think they are paid fairly, a report from the CIPD finds

Its research, which surveyed 465 employers and 2,200 workers, found that even fewer employees (34%) think that everyone in their organisation is paid fairly.

Three in five workers (60%) said their line manager has never told them why they get paid what they do.

Meanwhile, less than a fifth (18%) of employers said they have a formal process to assess and manage pay risk and only a third (30%) said they have a definition of what fair pay means in their organisation.

The CIPD is calling on employers to be more transparent about both their pay processes and outcomes, in order to improve employees' perceptions of remuneration.

When people don’t think they are paid fairly organisations reduce their chances of attracting and retaining the best talent, researchers said. Employers could also miss out on opportunities to improve employee performance and wellbeing.

Charles Cotton, senior reward and performance manager at the CIPD, said organisations can do much more to communicate their pay structures.

"Failure to be transparent about pay can make staff feel that they are being kept in the dark and feed a perception of unfairness," he said.

"There’s a real opportunity for organisations to do a lot more around communicating their pay policies to staff and encouraging line managers to talk to their teams about it, so staff understand how and why such decisions are made.”

He added that, as scrutiny around pay reporting persists, organisations will find it challenging to gain employee trust over pay: “Communication is only part of the story and won’t ensure people are paid fairly in the first place. Continued scrutiny over executive pay and gender pay gap reporting shows this is still an issue that many organisations are wrestling with, so businesses need to be on the front foot when it comes to understanding and assessing pay.”

Speaking to HR magazine, Luke Hildyard, director of the High Pay Centre, said that being clear about pay is especially important in the UK, where pay differences are more pronounced.

"Pay and contributions determine one's standard of living and it's important that people have an understanding of that in order to be paid more. We have an extreme form of capitalism where differences in pay produce status. In other countries, this isn't so pronounced," he said.

Hildyard added that there must also be greater clarity around shareholder pay, aided by trade unions: "It would be interesting to know what companies are spending on pay in relation to overall expenditure, payments to shareholders, and the impact this is having on workers. Staff forums and trade unions are critical to getting clarity on pay, and in providing spaces where people can have awkward conversations about pay."

The CIPD wants to see all organisations have a clear definition of fair pay that covers both pay processes and outcomes. This should be developed with input from staff on what fair pay means to them, it said.

Medium and large employers must carry out an Equal Pay Audit annually to ensure they are complying with the law and provide a narrative that explains to staff and other stakeholders what skills, behaviours, performance and values they want from employees and how they will reward and recognise them in return.

Further reading

Should employees set their own pay?

Executive pay: Is RemCo discretion the answer?

Fawcett calls for 'right to know' law to tackle unequal pay

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