Pay equity remains a hot-button issue in this nation, and it’s imperative that you get in front of it at your organization. Not only is conducting a pay equity analysis the right thing to do, but in an evolving business environment in which employment is low, it can affect your ability to recruit and retain talent.
What is the word on the street regarding your employer? Is it that you compensate your people equitably, ethnicity and gender notwithstanding? Either way, people will hear of it. Hopefully, they don’t hear on the news that your organization has been sued.
With that said, here’s a guide to pay equity analysis – and more.
Explain Pay Equity
This essentially means paying your employees for “like-for-like” work. In other words, it means compensating your employees for performing the same or similar duties, while considering tenure, education, experience, performance level, etcetera.
Explain Pay Equity Analysis
Also known as a pay parity audit, this is the process of examining an employer’s pay rates for disparities related to duties, ethnicity, and the considerations mentioned above.
Explain Why Conducting an Analysis is Important
In a nutshell, the benefits of conducting such an analysis includes:
- Improved recruitment and retention. In this tight labor market, a parity audit is a smart way to edge out the competition since, as we say, word does get around.
- Contented stakeholders. Stakeholders are increasingly demanding that employers do their part to mitigate the societal issue that is pay inequality.
- Fosters innovation. People tend to flourish in inclusive environments. They’re generally more creative and productive, and that will bolster your bottom line.
- Reduces legal risk. Media scrutiny is at an all-time high, so make sure you’re not blind-sided with a lawsuit.
- Promotes workforce diversity. If you aren’t paying people of color or women of any ethnicity equitably, your brand will suffer. The good news is that the opposite is also true.
Explain What a Pay Equity Analysis Entails
Essentially, a pay equity analysis involves:
- Gathering data by categories including ethnicity, gender, total pay, base salary, and other considerations that could explain pay disparities.
- Taking advantage of statistical models. Utilize regression models that factor in any rationale for pay differences (education, experience, etc.), then have them validated by legal counsel, pay leaders, and other stakeholders to make sure they’re in line with pay norms the organization seeks to build upon.
- Risk and remediation. By using models, employers are able to view any systemic compensation discrepancies across classifications.
Explain Pay Equity Analysis Steps
Here are the basic steps to take:
- Understand why you’re conducting an analysis. Is it to comply with governmental regulations, avoid being sued, or some combination? How you answer will inform your process.
- Study current compensation policies. Determine how you set your pay rates so that you “get” the foundation for your current pay equity approach.
- Collect pay rate data. You’ll need info including base pay, ethnicity, age, education levels, and overtime pay and bonuses. Then examine data such as performance reviews and punitive actions, where applicable.
- Determine what “comparable work” means in the state in which you’re based. State laws contain more requirements for determining comparable work than does federal law.
- Examine the data. Here, you’ll check for any pay differences that can’t be explained by merit, seniority, work production, etc.
- Execute changes. If you find pay disparities you cannot justify, you must make changes. Note that it’s illegal to slash pay when establishing remedies, so you’ll have to give at least one of your employees a raise.
If you use this guide to pay equity analysis, you can really help yourself, in terms of your ability to lure and keep the talent you need. If you need help pulling an analysis off, we suggest the leading global HR consultant Mercer.