Paying People Fairly: The Overlooked Strategy for Attracting and Retaining Talent

By Dr. Mary C. Kelly, Economist, Leadership Expert, and U.S. Navy Commander (Ret.)

Attracting and keeping top talent is one of every quality CEO’s top priority.

Yet one of the most overlooked strategies for doing that is also one of the simplest: paying people fairly.

Pay equity is not just a moral or ethical issue, it is an economic one. When employees feel underpaid, undervalued, or ignored, they disengage, underperform, or quietly leave. The cost of turnover, loss of institutional knowledge, and decline in morale can devastate a company’s culture and bottom line.

In today’s workplace, where skilled professionals have options, companies that fail to pay fairly will struggle to compete no matter how great their mission statement sounds.

The Hidden Leadership Blind Spot

Many senior leaders assume that compensation is being managed appropriately by their HR teams or line managers. They believe pay is regularly reviewed, benchmarked, and updated.

But in reality, pay reviews often happen only after a problem surfaces, such as when someone threatens to quit, when an offer letter from a competitor shows up, or when morale starts slipping.

This is a leadership blind spot — a gap between what executives believe is happening and what employees are actually experiencing. Even well-intentioned leaders can unknowingly alienate their best workers simply because they have not looked closely enough at how compensation decisions are made and maintained.

The Risk of Neglecting Pay Equity

When pay equity is neglected, several predictable problems emerge:

1. Pay Compression – New hires brought in at market rate end up earning more than long-time employees doing the same work.
2. Quiet Disengagement – Loyal employees discover pay discrepancies through job postings or conversations and mentally check out.
3. Loss of Trust – Once employees feel leadership is not valuing them fairly, that sense of betrayal lingers even after a raise.
4. Talent Drain – Top performers leave for employers who do not just talk about fairness — they practice it.

This is not just about keeping people happy; it is about building a resilient, high-performing organization. Compensation reflects culture. If the culture says, “We take care of our people,” that message needs to show up on paychecks.

Conducting a Comprehensive Pay Review

A comprehensive pay review is not just a spreadsheet exercise. It is a strategic process that aligns compensation with performance, fairness, and future needs.

Here is how to do it well:

1. Define the Purpose and Scope

Start with clarity. Why are you conducting the review? Is it to address pay equity, improve retention, benchmark against market data, or prepare for expansion? Define what good and fair pay means for your organization.

Scope matters. Decide whether the review covers all employees, certain departments, or the most critical roles first.

2. Gather Accurate Data

Collect:

• Internal data: Current salaries, job titles, tenure, performance ratings, education, and experience levels.
• External data: Reliable market salary surveys, local labor statistics, and industry benchmarks.

Leaders often make the mistake of using outdated or incomplete data. In a fast-moving economy, salary ranges can shift dramatically within a year, especially in high-demand fields like technology, healthcare, animal healthcare, and skilled trades.

3. Evaluate Pay Equity Internally

Analyze pay data by education, experience, tenure, and role. Then look at race, gender, and locality. Look for disparities that cannot be explained by legitimate factors like experience or performance. Modern HR software can help visualize these gaps, but leadership must interpret the findings thoughtfully.

Ask:

• Are employees in similar roles being paid consistently?
• Are there patterns suggesting bias or inconsistency?
• Are raises and bonuses distributed equitably, or are they influenced by favoritism or negotiation style?

4. Benchmark Against the Market

Compare your internal pay structure with external data. Determine where your organization sits below, at, or above market rate. Pay below market long enough, and your best people will leave. Pay far above market without strategy and you create unsustainable payroll pressure.

The goal is balance: competitive pay that rewards contributions while maintaining fiscal discipline.

5. Review Pay Policies and Practices

Examine the systems driving pay decisions. Do managers have too much discretion? Are performance reviews tied to measurable outcomes or subjective opinions? Is HR empowered to correct inconsistencies?

A fair pay system requires consistency. Everyone should understand how pay is determined, how raises are earned, and how the company ensures equity. Ambiguity breeds distrust.

6. Communicate Transparently

Transparency builds trust. While you do not need to publish every salary, employees should know that leadership takes pay equity seriously and acts on it. Communicate the purpose, process, and findings of the review, and explain what changes are being implemented.

Even small corrections signal fairness. Employees appreciate knowing that leadership is watching out for them.

7. Act and Follow Through

Pay reviews without action are worse than no review at all. When inequities are identified, fix them promptly. Create a timeline for adjustments and ensure accountability.

Then, schedule regular reviews, usually annually or biannually. Make compensation fairness part of your organization’s rhythm, not an afterthought.

The CEO’s Role in Pay Fairness

Fair pay starts at the top. CEOs and senior executives set the tone for how people are valued. When leadership models transparency and fairness, it cascades through the organization.

Senior leaders need to ask the leadership team:

• When was the last time we conducted a pay equity audit?
• Do our compensation practices reflect our stated values?
• Are our managers equipped to have open conversations about pay and performance?

Executives can also champion strategic pay planning, ensuring the budget reflects future talent needs. As automation, AI, and demographic shifts reshape the workforce, fair compensation will be a key differentiator in recruiting and retaining the right people.

The Payoff: Trust, Retention, and Performance

Paying people fairly does more than prevent turnover. It creates a culture of trust and accountability. Employees who feel valued contribute more, stay longer, and advocate for the organization. They do not just work for a paycheck; they work for a purpose.

The return on investment is lower turnover, higher engagement, better performance, and a stronger employer brand.

Pay equity is leadership in action. It is not just about dollars. It is about dignity, respect, and doing the right thing for the people who make your organization thrive.

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