Pay Transparency: Are you ready to tackle the benefits gap?

Pressure to ensure that employee benefits do not contribute to pay gaps will increasingly require employers to calculate the total amount being spent on each employee.

Traditional pay gap reporting has made significant strides in identifying pay disparity, but it often fails to capture the complete picture.

In response, countries are increasingly introducing new legislation to address this issue, with the EU Pay Transparency Directive set to require employers to calculate the total amount being spent on employees across the European Union from next year.

To prepare for this new era of pay transparency, it is critical to establish a solid foundation for calculating and comparing benefits packages, as well as implementing measures to communicate and benchmark findings and address any gaps.

Calculating the Value of Benefits

The time taken for employers to manually calculate the total value of each employee’s benefits package is considerable. Therefore, it is essential to implement a process to automate this.

An employee benefits platform such as Darwin not only consolidates all the information about the benefits an employee has into one place, but it also automatically updates the value of someone’s benefits package if they flex their benefit selections, adjust a level of cover, or add a dependant.

By calculating the value of non-cash benefits, such as a car allowance, it can also generate a ‘total reward statement’. This captures the full value of someone’s employment package, including all their salary and employment perks.

Understand the Gaps

Once you have a process in place for calculating the value of benefits, it is important to benchmark this against similar organisations and use your employee benefits platform to run reports segmented by age, gender, and ethnicity to identify what is driving pay disparity.

If you already have a significant gender pay gap, are pension payments based on salary exacerbating benefits disparity? Are higher-value benefits such as private medical insurance and company cars only available to more senior employees? Are those senior employees more likely to be male? Are home workers missing out on office-based perks? Are certain demographics unaware of all the benefits they are entitled to?

It is useful to bear in mind that, for now, incoming legislation only requires you to calculate gaps, rather than rectify benefits gaps. However, it is important to future-proof your solution so you can pull the analytics needed to resolve gaps in the years to come.

Communicating with Employees

Transparency will be a key aspect of communicating benefits gaps. Not only will EU employees have the right to see their data, but they will also have the right to see how it compares to others.

Incorporating visual tools within your employee benefits platform to allow employees to access this data for themselves can be beneficial. This not only alleviates the strain on HR teams, whose time is better spent addressing pay gaps than answering requests for information, but it also fosters a culture of transparency where employees can view the data they need.

It can also be useful to include information about what pay transparency is and your strategy for delivering on this next to where employees self-serve their benefits. This can encourage employees to make full use of their employee benefits package, ensuring they receive the full financial value they are entitled to.

If you have discrepancies across different countries, running global analytics can help you understand and communicate the reasons for this. Most importantly, ensure you allocate enough time to establish the right foundation, allowing you to act upon and communicate the findings effectively.

About Mercer Marsh Benefits

Mercer Marsh Benefits helps clients manage the costs, risks and complexities of employee health and benefits, through the combined expertise of Mercer and Marsh, businesses of Marsh McLennan (NYSE: MMC). Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of over $24 billion and more than 90,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit marshmclennan.com, follow us on LinkedIn and X.

About Darwin

Darwin is a market-leading benefits technology platform trusted by hundreds of organiations around the world and covering more than 6 million lives in over 100 countries. With Darwin at the core of Mercer Marsh Benefit’s digital solutions ecosystem, we combine the best in benefits broking, advisory and seamless digital solutions to deliver unrivalled benefits technology expertise and a world-class integrated experience. For more information on our suite of digital benefits solutions visit Mercer Marsh Benefits.

About Benefits You App

Benefits You is the digital front door to an employer’s health and benefits ecosystem. Downloadable from the Apple and Google Play Stores, it enables employees simple, easy access to all their health and wellbeing offerings, including Single-Sign-On to Darwin. It also features push notification technology to ensure your employees never miss relevant benefits communications.