What are the disadvantages of Pay Gap for organisations?

Question

what are the challenges organisations can face due to pay gap?

Answer 1

I assume you mean where the Company pays it's workforce at rates lower than the Market average ?

Plainly the main challenge will be to retain existing skilled workers and to recruit new ones. The combined 'carrot & stick' approach is perhaps the best.

Recruitment is going to be the biggest issue - if the Company is forced to recruit at rates higher than the existing work force - and existing workers are then expected to train the new recruits - in a very short time the wages gap will become common knowledge. This will immediatly lead to skilled workers deserting for better paid positions elsewhere (with the result that the Company looses it's best people).

It is thus vital to minimise staff turn-over (if no-one leaves you don't need to recruit).

Techniques involve providing non-wage benefits that cost the company little but help the work force feel valued - for example free Coffee machines, subsidised Canteen etc.

Effective Training and an internal 'promotion' system have the double benefit of offering incentive to 'stay on' (you might get trained & promoted) and avoiding the need to recruit from outside at the higher skill levels - if you only need to recruit lower skilled workers (who you then train up) it is much easier to get some-one in at less than Market rates.

Company specific non-standard multi-dimensional Job Grading and performance evalution systems can be used to confuse the workforce (if everyone has a 'unique' Job Title it is impossible to make simple comparisons against 'industry standard' rates).

Finally, any discussion of pay rates needs to be made a sacking offence.