Gauging Pay Equity in Your Company

Even before the pandemic, the topic of pay equity was a news mainstay. Indeed, decades after passage of the Equal Pay Act, the gender pay gap – the …

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Even before the pandemic, the topic of pay equity was a news mainstay. Indeed, decades after passage of the Equal Pay Act, the gender pay gap – the difference between what men and women who perform comparable work are paid – is still widely discussed.

Thanks largely to the COVID-19 outbreak, which has caused more individuals to rethink where and how they wish to work, the topic has been intermingled with the nascent leverage employees now have. So, to help you recruit and keep top talent, a pay equity analysis is in order.

Here’s what you need to know about gauging pay equity in your company.

What is a Pay Equity Analysis?

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Also called a pay audit, a pay equity analysis can help companies determine whether any pay disparities exist. If any pay differences cannot be explained, enterprises have opportunities to correct the situation.

What Should a Pay Equity Analysis Accomplish?

A top goal, frankly, is to avoid being sued. You want to protect yourself from prospective wage discrimination lawsuits. Also, by improving your company’s pay situation, you’ll be able to lure and keep the best employees. How? By offering competitive rates and equitable opportunities for advancement.

How Should I Conduct a Pay Equity Analysis?

There are some steps you should follow. Consider these:

  • Identify the purpose. Why are you conducting an analysis? Is it to hew to government regulations, or to narrow pay gaps in your company? Clarifying the “why” will inform the method you use, your deadlines, the personnel involved, how much you will spend, and the extent to which stakeholders buy in to your plan.
  • Determine why you pay what you do. Knowing how your company came to its compensation rates will help you understand the underlying causes of any pay inequities in your organization. It will also ultimately help keep you safe from legal actions stemming from pay equity
  • Get your data together. You’ll want info such as job title, job level, hire date, department, and gender. And, depending on the scope of your project, you may also want age, ethnicity, education level, and starting salary. Data such as performance reviews, any punitive actions, and field experience can come into play as well.
  • Check for comparable work. Federal law notwithstanding, some states have broader definitions of what “comparable” and “substantially similar” work means. Be certain that you know the labor laws of your state before making in-house comparisons.
  • Run the data. What you want to do here is figure out whether there are pay differences that can be linked to criteria such as race, gender, or age.
  • Look for legal justifications. Just because employees that do the same work aren’t paid the same wage doesn’t mean you’re doing something illegal. In fact, according to federal law, you’re in the clear if differences in wages are based on merit, seniority, a system that measures earnings, production quality or quantity, or any other factor than gender.
  • Solve issues. If there are any disparities that you can’t justify, now’s the time to address them. You aren’t allowed to lower employee compensation, which means you’ll need to figure out a way to provide raises. Then digest what you’ve learned and fold it into future payment policies.

As you can see, gauging pay equity in your company is a win-win for your organization as well as employees, both current and future. In today’s business environment, you don’t want to hinder your ability to attract and recruit. And if you can’t handle a pay equity analysis on your own, or if you don’t have the time, get expert help.


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