In today’s talent-constrained world of work, every company is looking to attract, retain and engage people with the right skills to drive organizational performance. Pay is a big part of the equation—in fact, in times of inflation and rising costs, it’s the No. 1 employee experience consideration.

New legislation around pay transparency and pay equity around the world, high-profile lawsuits like the $118 million Google settlement, and changing employee expectations put even more pressure on organizations to prioritize fair pay.

Understanding the gender pay gap

The gender pay gap refers to the difference in average earnings between men and women, often expressed as a percentage of men’s earnings. For instance, if women earn 82 cents for every dollar earned by men, the gender pay gap is 18%. This gap can be influenced by various factors, including differences in education, experience, industry and work hours. However, a significant portion of the gap remains unexplained and is often attributed to systemic discrimination and bias.

Why pay equity matters

Pay equity is not just a matter of fairness or legal compliance. It has profound implications for business performance, employee satisfaction and societal wellbeing. Companies that ensure pay equity are more likely to attract and retain top talent: According to our definitive guide to pay equity, fair compensation is 13 times more important for employee retention and engagement than pay levels. Employees who feel fairly compensated are more engaged, productive and loyal; they collaborate more, and in turn, they create a positive work environment and higher overall performance.

Diverse and inclusive workplaces that prioritize pay equity also are more likely to be innovative and financially successful. Companies like Unilever, Microsoft and Accenture have demonstrated that focusing on pay equity can lead to significant business benefits, including closing the gender pay gap and achieving higher financial returns.

When will the gender pay gap close?

Despite increased attention and efforts, progress toward gender pay equity has been slow and uneven. According to our latest study based on Visier community data, gender pay equity is still a long-fetched dream. Since 2017, the gender pay gap has decreased from 18% to 15%, but no net progress has been made since 2020. The managerial gender pay gap has also seen a reduction, from 14% in 2017 to 10% in 2023, but this progress is still not fast enough.

At the current rate of progress, achieving gender pay parity remains a distant goal. Assuming steady progress, the unadjusted gender pay gap will not close until 2048, while female managers are expected to reach pay parity by 2036. This slow pace of progress continues to drive more women into poverty and negatively impacts the economy. According to a study by the Institute of Women’s Policy Research, if women in the United States received equal pay for equal work, poverty among working women would be reduced by half, and the economy would gain an additional $482 billion.

Strategies for addressing pay equity

To accelerate progress toward pay equity, companies need to adopt comprehensive and strategic approaches. Here are some key steps that organizations can take:

1. Establish a clear purpose: Articulate the business benefits of pay equity, such as improved financial performance, customer satisfaction, and talent attraction and retention. Emphasize the importance of fairness and compliance with legal requirements, such as the EU Pay Transparency Directive.
2. Solicit leadership and team support: Secure leadership endorsement and form a cross-functional team that includes diverse representation from HR, legal, finance and other relevant departments. Clearly define roles and responsibilities to ensure accountability and effective collaboration.
3. Conduct pay equity audits: Gather comprehensive data on employee compensation, including base pay, bonuses and benefits, segmented by gender, race and other demographics. Use statistical analysis to identify pay disparities and understand the root causes, such as differences in job roles, performance ratings or negotiation practices.
4. Implement pay transparency: Publicly share pay ranges for different roles within the organization to promote transparency and trust. Clearly communicate criteria for pay increases, promotions and bonuses to ensure employees understand how decisions are made.
5. Review and revise compensation policies: Standardize pay practices across the organization to eliminate inconsistencies and biases. Conduct regular reviews of compensation policies to ensure they remain fair and equitable, adjusting as necessary.
6. Focus on equitable talent processes: Implement structured interviews and standardized criteria to reduce bias in recruitment and hiring processes. Use objective performance metrics and regular feedback to ensure fair performance evaluations and promotions. Provide equal access to development opportunities, such as training, mentorship and projects, for all employees.
7. Leverage technology and analytics: Use AI-based tools to analyze pay data and identify patterns of inequity, enabling proactive interventions. Implement systems for continuous monitoring of pay practices to ensure ongoing compliance with pay equity standards.
8. Provide training and communication: Train managers and leaders on the importance of pay equity and how to make fair pay decisions, including mitigating unconscious bias. Educate employees to increase awareness about pay equity, their rights and how to raise concerns about pay disparities.
9. Continuously monitor and improve: Establish clear, measurable goals for pay equity and track progress toward achieving them. Provide regular reports on pay equity progress to all stakeholders, including employees, leadership and external parties, as required. Promote a culture of equity and inclusion by encouraging open dialogue about pay equity and creating safe spaces for employees to discuss concerns and provide feedback.

Who’s doing this well?

If all of this sounds intimidating and scary, look at these companies that have successfully implemented strategies to close the gender pay gap and move toward full pay equity:

• Salesforce: The U.S. tech company is a pioneer in this space, having worked in the area since 2015. Driven by CEO Marc Benioff, the organization uses a systemic approach to confront the gender pay gap. The company conducted thorough pay audits, identified disparities and invested millions of dollars to adjust salaries. Salesforce maintains transparency by communicating its work and outcomes both internally and externally, and the workforce now trusts the company to look out for equity across the organization.
• Tetra Pak: The Swiss food packaging company has made significant strides in promoting diversity and inclusion, particularly focusing on increasing female representation in leadership roles and ensuring pay equity. The company has embedded diversity, equity and inclusion into its broader sustainability goals, with a global DEI panel and regional panels to ensure diverse voices are heard. Leadership commitment, inclusive leadership training and policy changes to support flexibility and development have been key strategies.
• SAP: The Germany-headquartered technology company has implemented a comprehensive strategy to achieve pay equity for its more than 105,000 employees. The company uses its “Check Tool” for real-time pay analysis to support managers in making better, fairer pay decisions. Additionally, caps on promotional increases were removed to ensure fair pay. SAP also focuses on broader rewards, such as benefits, career growth and learning opportunities, to address all factors influencing equity.

What’s next

Companies need to prioritize gender pay equity but shouldn’t stop there. Full pay equity is not constrained to gender but covers all demographics, from ethnicity to age, socioeconomic background, disability status and sexual orientation. Achieving pay equity is an ongoing process that requires commitment, continuous effort and a strategic approach that dives deep into exploring what equity really means.

Companies that prioritize pay equity are better positioned to thrive in today’s competitive and socially conscious market. By embedding equity into all business practices and maintaining transparent communication, organizations can create fair and equitable workplaces that drive success and innovation. The journey to pay equity is long, but with concerted efforts and strategic actions, organizations can accelerate progress and make meaningful strides toward closing the gender pay gap now and into the future.

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Hear more from Josh Bersin in his keynote address, HR Technology 2025: An Existential Change Driven by AI, at this month’s HR Technology Conference in Las Vegas. Click here to register.

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