Implementing Pay Equity Analysis

implementing pay equity analysis equal compensation workplace

Have you ever conducted a pay equity analysis? If you haven’t, it is imperative that you get going, particularly in this evolving labor environment in which people generally have more say in terms of how and where they wish to work. Yes, pay equity goes to the heart of your ability to recruit and retain talent. 

Is word getting around that you pay your employees equitably, gender or ethnicity notwithstanding? Whether you do or you don’t, people will hear about it. Hopefully, they don’t hear through the media that you’ve been sued. 

So, let’s get started. Here is what you should know about implementing a pay equity analysis. 

What Is Pay Equity? 

Basically, pay equity means compensating your people for “like-for-like” work. Said another way, it’s paying your employees for performing the same or comparable duties while factoring in education, tenure, performance level, experience, etc. 

What Is A Pay Equity Analysis? 

A pay equity analysis, also known as a pay parity audit, is the process of scouring organizational pay rates for any disparities related to factors mentioned above, plus duties, ethnicity, and other criteria. 

Why Should We Take The Time To Conduct An Analysis? 

We hit on a few of the benefits up top. But here they are in a nutshell for equal pay: 

• Increased Ability To Recruit And Retain Employees - An audit is a good way to get a leg up on the competition in this tight labor market since word spreads fast. 

• Satisfied Stakeholders - More than ever, gender and ethnic pay parity is a high priority since employers’ collective feet in this regard are increasingly held to the proverbial fire. 

• Promotes Innovation - An inclusive environment spawns more innovation, productivity, and creativity that will ultimately add to your bottom line. 

• Curbs Legal Risk - If you aren’t in the clear, you won’t escape media scrutiny forever. A lawsuit is bad for business and can distract you from what you do best. 

• Speeds Workforce Diversity - If you are not paying women or people of color equitably, your brand will suffer. On the other hand, the opposite is also true. 

What Does A Pay Equity Analysis Entail?  

• Pulling Data Together - You must gather data by categories such as gender, ethnicity, base salary, total pay, and other factors that might explain pay differences. 

• Utilizing Statistical Models - Use regression models that allow for any justification for pay disparities, such as education, experience, etc. Such models must be validated by compensation leaders, legal counsel, and other stakeholders to ensure that they align with compensation norms the company seeks to build on. Such norms may mean paying for experience or performance, for example. 

 Remediation And Risk - Though regression model utilization, organizations can see systemic pay discrepancies across classifications such as regions, gender, specific positions, and for the organization overall. 

What Are Pay Equity Steps? 

An effective pay equity analysis involves these steps: 

• Make Sure You Know “Why” - What are you trying to do? Avoid being sued? Comply with federal or state regulations? How you answer why you want to do an analysis will affect your methodology, timeline, and budget. 

 Analyze Your Pay Policies - Figure out how you establish your pay rates. Doing so will help you understand the foundation for any existing pay equity. 

 Pull Together Pay Rates - This will require information such as starting pay, race, education levels, age, and overtime pay and bonuses. Then, you can start looking a data like performance reviews and any punitive actions. 

 Find Out What “Comparable Work” Means In Your State - When it comes to equal work, U.S. law is clear. However, state laws contain more requisites for determining comparable work. 

 Check The Data - This is where you look for any pay disparities that can be pinned on gender, ethnicity, etc. In other words, differences that you can’t otherwise explain by merit, work production, seniority, etc. 

• Make Changes - If there are pay differences you can’t justify, you must act to ensure there is no workplace discrimination or illegal bias. It is important to note, however, that in establishing remedies, it is unlawful to reduce employee wages. Therefore, you must find a way to raise the pay of one or more employees. 


Now we have made the case for implementing a pay equity analysis, which is crucial to your organization’s ability to lure and retain talent as well as its overall wellbeing. If you need help pulling it off – and you likely do – contact a leading global HR consultant.

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