Diversity, equity, and inclusion (DEI) are more than just buzzwords. These three words are, in fact, vital for a thriving workplace culture. But where does global payroll fit into this picture? Let’s clarify our terms.
Diversity encompasses the variety of characteristics among personnel, such as ethnicity, gender identity, sexuality, culture, and nationality. Equity ensures fair treatment for everyone.
Inclusion creates an environment where diverse individuals feel valued and can contribute fully.
At the Intersection of Global Payroll, DEI
You might still be wondering what role global payroll professionals play regarding DEI. To begin, fair pay is crucial in maintaining employee satisfaction, and the connection between the payroll process and the employee experience has never been closer. Meanwhile, access to improving payroll data provided by more capable payroll solutions emerging in the marketplace is helping businesses maintain and achieve compensation parity across diverse global workforces.
According to a 2020 report by McKinsey, companies with the most diverse executive teams are more likely to outperform peers on profitability by 36%. However, although most employees believe their employer puts an emphasis on DEI, one in five (22%) say there is no one demonstrating its importance through action in the business, according to a 2021 Eagle Hill Consulting Survey. Meanwhile, a study conducted by the Harvard Business Review in February 2019 revealed that 75% of employees claim that the current DEI programs in place at their organization deliver no personal benefits.
We will get to the how shortly but suffice to say, payroll professionals have an opportunity to play a significant role in promoting and improving DEI in the workplace. Now, that’s exciting!
Payroll Holds the Key
Payroll leaders access more employee data than almost any other business function. If harnessed and leveraged correctly, this data can allow payroll professionals to be more active in supporting board-level objectives. A critical organizational goal for businesses is improving workplace culture and boosting corporate DEI. It’s quite possible that the C-suite could soon discover that payroll indeed holds the key to game-changing DEI results.
Payroll Data Can Advance DEI Initiatives
Payroll professionals have access to both the insights and the expertise to support, help, and implement equal pay measures for all. Payroll professionals also have the tools to comprehensively audit an organization’s compensation structure to identify gender, race, or other pay-related disparities. Audits can help identify pay discrepancies that create opportunities for payroll professionals to form alliances with HR to help bridge gender or ethnicity wage gaps.
A Rapid Technological Shift
Implementing DEI initiatives through payroll can be challenging if payroll operations are laden with outdated systems or processes.
Legacy IT systems hinder those yet to update which means they may be left behind in their ability to influence DEI initiatives as the systems may not give them access to the same level of data that newer solutions can provide. In addition, older systems mean more time is spent checking payroll processes leaving less time for payroll managers to focus on more strategic tasks such as DEI analysis. However, the rapid technological shift post pandemic has seen more businesses than ever undergo a software transformation— especially in payroll. These new solutions—due to improved automation—free up time for more strategic analysis and provide payroll managers with access to more data and reporting options to identify trends and potential DEI gaps.
Rapid digital transformation has infiltrated payroll operations to provide even more powerful payroll solutions which, in addition to streamlining processes and automating manual tasks, generates vast amounts of big data.
It is through the analysis of the payroll data that the industry can unlock the doors to DEI success.
Harnessing Payroll Data to Improve Pay Transparency
Closing the gender pay gap is not just fair; it’s smart business, too. Studies show that closing the gender gap could add $13 trillion to the global GDP. Therefore, embracing diversity and fair pay practices is critical for any business keen to identify ways to boost profits and innovation. By accessing payroll data that provides information concerning gender representation and associated pay across all levels of an organisation, payroll can promote greater organisational transparency around pay structures. Studies also show that increased workplace transparency positively impacts talent attraction, retention, and productivity.
Identifying Workforce Inequity
In addition to pay-related information, payroll data can also support diversity audits. Studies have repeatedly shown that businesses with the broadest diversity of perspectives benefit from greater profits, performance, and creativity. Well, payroll holds the key to the data that can highlight the diverse makeup of an organisation. Payroll professionals can analyse and identify diversity representations across all leadership levels of a global workforce. Auditing existing payroll systems may also identify other systemic issues contributing to workforce inequity.
For example, according to Human Resources Today, in 2015, Salesforce became the first U.S. company to conduct an equal pay audit, which led to $3 million (USD) in salary adjustments. Since then, the company has embarked on several DEI initiatives to create a more diverse and inclusive workplace for its employees. In 2020, Salesforce set up a Racial Equality and Justice Task Force led by senior executives and comprised of entry-level employees. The task force aimed to drive systemic change by listening to those affected, setting goals and tracking relevant metrics, and creating new programs and processes as part of the solution.
Creating Alliances for Successful DEI Outcomes
Businesses need to go beyond traditional practices and look to integrate and incorporate DEI initiatives into all daily operations, including payroll. To omit a function that can access such powerful data will only negatively impact the success of any DEI initiative. Hence, more than ever, payroll needs a pivotal seat at the table to foster positive alliances and coalitions with other functions, such as HR, finance, and IT, to maximise DEI impact. The journey toward gender equality is not a solo race. It’s a relay that requires collaboration, teamwork, and a unified commitment to DEI improvement from all business functions.
Achieving Equitable Workplaces for All
Unravelling the complexities of DEI and its relationship with payroll can be confusing. However, DEI awareness has highlighted the importance of fairness in the workplace, and this evolution represents a new opportunity for payroll professionals to broaden their remits (areas or roles officially assigned) and further raise the profile of the profession. A deeper understanding of the interconnectedness between payroll and DEI can result in businesses achieving more equitable workplaces for all. I say this because for employers, pay is not just about numbers—it is also about fairness and transparency.
Similarly, for those reading this, global payroll is not just about paying employees on time but also about enhancing the employee experience. Whereas, for employees, pay, rewards, or benefits do not solely define how happy they feel at work; it also hinges on how valued they feel in their roles – from receiving accurate, timely, and fair pay to being part of a diverse team where everyone has equal growth opportunities. Payroll influences all these considerations.
Integrating DEI into all aspects of the employee payroll cycle is critical if we are committed to cultivating inclusive workplace cultures that support happier employees who stay longer and produce more. If businesses truly wish to unlock the potential of their DEI initiatives, now is the time to engage the payroll keys required for their success.
Written by Nick Day
Nick Day is Founder of JGA Recruitment, specialist global payroll recruiters. He is MA and REC qualified in Recruitment Practice and holds a CMI Level 7 Qualified Professional Consultant and ILM Level 7 Qualified Executive Coach and Mentor.