Organisations must focus on fair reward for all or risk losing the benefits of a diverse workforce

Employee engagement and level of contribution depends on staff feeling that they are fairly rewarded for their skills, knowledge and contribution, yet only 41% of organisations include fairness as an objective of their reward strategy, according to the Chartered Institute of Personnel and Development (CIPD).

The key role that pay and reward strategies have to play in delivering business objectives, and the risk that ineffective strategies can undermine the cultural values of the organisation, are key topics for debate at the CIPD Annual Reward Conference, on the 8 February 2006. Speakers from John Lewis Partnership and McDonalds will use the conference to share details of how their reward strategies reflect their organisational culture.

To coincide with the conference, the CIPD is launching ëReward and diversity: making fair pay add up to business advantageí, a new book addressing these issues. This suggests that there is no right or wrong pay and benefit package. But organisations need to tailor their reward strategy to their own particular culture and business objectives.

Aligning reward and diversity strategies is not only common sense but good business sense. Equal pay audits can help organisations achieve central business targets if employers are smarter at using the data to find the underlying causes for unexplained gaps exposed by an analysis of pay figures.

Dianah Worman, CIPD Diversity Adviser, warns that equal pay reviews alone do not make an organisation an equal pay or fair pay employer. îEmployers should begin from the principal that all individuals, not just women compared with men, should receive equal pay for equal work. Equal pay reviews must therefore look beyond gender and explore other diversity dimensions such as age, ethnicity, and disability for example. This will help employers spot circumstances where individuals are paid unfairly, for no justifiable reason.

ìBut employers should recognise that equal pay audits go beyond number crunching, massaging figures and complying with legislation. They are about using figures to expose flawed employment policies and practices so these can be reviewed to make sure the same problems donít occur again. It is in the self interest of employers to explore the underlying issues, such as poor diversity training, weak performance management systems and biased appraisal processes in order to create a culture based on fairness as this contributes to better business performance.î

Charles Cotton, CIPD Reward Adviser, adds, Good pay and benefit packages can attract people to an organisation, retain staff and motivate them. Research shows that a diverse workforce can compliment these benefits through increased productivity and performance, but managed badly, efforts to improve diversity can create conflict and tension in the workplace.

ìReward and diversity professionals need to work together to align the two strategies to achieve fair reward. They must make sure that pay and benefits are determined by the relevance against job-related criteria. Most jobs are subject to change and growth therefore it is imperative that employers track changes by reviewing job descriptions regularly. It is not going to matter how good the salaries and benefits are if companies then fail to manage employees in a fair manner.

The research, Reward and diversity: making fair pay add up to business advantage, based on 12 case studies indicates that the following elements are essential to implementing fair reward:

Monitoring the reward system regularly: While equal pay reviews can be a good starting point for addressing fair reward, they should be repeated at regular intervals. Where possible, employers should also use analytical job evaluation to determine where individuals are doing equal work. If this is not possible, organisations should seek to compare the pay of those in the same grade or those with similar job titles and levels of responsibility, skill, or qualification.

Ensure objectivity in all aspects of reward: Employers should begin from the principle that all individuals should receive equal pay for equal work. Ideally the review should examine a range of diversity dimensions, such as gender, ethnicity, disability, and age. Employers with long service-related pay scales should question the justifiability of them ñ does longer service always translate into greater competence and effectiveness in post?

Good communications with employees on reward principles: Ensure employees understand reward principles and gain feedback from employees in terms of how reward is working in practice. Line managers should be regularly updated and trained on reward issues so they can communicate effectively with employees and create realistic expectations.

Ensure reward packages are designed to attract a more diverse workforce: An organisation that recognises individual diversity should create a flexible reward package, and should not be based on the ’one size fits all’ theory.