Conducting a Successful Pay Equity Audit

A pay equity analysis is an evaluation of an organization’s pay structure, policies, and practices to determine if there are any inequities leading to pay discrepancies. 

The audit’s goal is to establish any inequities in pay based on gender, race, or economic background and correct them. 

A successful audit requires human resources, money, commitment, cooperation, and time so it can be challenging to complete. Conducting a successful pay equity audit requires the following steps: 

Early Planning

A successful pay equity analysis requires planning as early as possible. The first step will be determining the purpose of the audit. Whether legal compliance or creating a fair work environment, you should establish the audit’s goals first. 

The analysis process is long and complex, so create a plan outlining the stages and checkpoints of the audit. Establish the methodology you will follow, the budget, the personnel you require, and the timeline.

Presenting a comprehensive plan ensures you get the green light for the analysis from the managers or executives. 

Analyze Current Pay Policies and Practices

After formulating your plan, research the company’s current pay policies and practices. Get an accurate picture of the pay structure at the firm. Only then can you have a chance to know if there are any discrepancies. 

Begin by determining how the current policies were established. Establish whether the pay practices are fair or biased. Find the root cause of any pay inequity at the firm. If there are any discrepancies in pay, are they justified? 

Start the pay equity audit at the HR department and consult the compensation and benefits team. They will know where the pay gaps are and narrow down your search. 

Collect The Necessary Data

Data is essential for a successful pay equity analysis. The information you gather will depend on the scope and purpose of your audit. 

It would be best to collect as much information as possible because the more data you gather, the more accurate your conclusions will be. Collect data on job title, description, level in the corporate hierarchy, base salary, bonuses, benefits, age, gender, total working hours, overtime, etc. 

The data-gathering stage is the most labor-intensive part of the audit. However, its importance in the wage gap analysis is paramount so do it comprehensively. 

Compare Work By Employees In Similar Positions

To establish any wage disparities, you must compare work done by employees in similar positions. Job title and description are insufficient to conclusively determine pay inequities. 

There are federal and state laws that determine comparable work, but they are largely inadequate. Be sure to research your state’s laws to establish comparable work standards for your analysis. 

You should hence perform a job evaluation to determine comparable work. Compatibility should stretch across all company departments. It will help you reach more valid conclusions. 

Evaluate The Data

After establishing comparable work and comparing different organizational roles, you should analyze the data you gathered. The purpose of the analysis is to identify and show if any wage disparities exist and the factors contributing to them.

Your analysis will depend on the sample size, the data you collect, its accuracy, and the type of compensation. If you collect the correct data and organize it well, the analysis should be straightforward. 

Establish If Pay Differences Are Justified

Based on your data evaluation, you may conclude that employees doing comparable work are not receiving equal pay. However, the pay disparity may be justified, and legal. 

Consult federal and state laws to determine if the pay gap is justified. Ensure you address any massive variances in pay. Finally, you should provide recommendations to reduce the pay disparities based on your analysis. 

A Successful Pay Equity Analysis

Follow the above steps for your pay equity analysis. Conducting a successful pay equity audit is complicated and tiresome. However, addressing it has far-reaching repercussions and benefits. 

You may be interested in: How to Conduct an Energy Audit for Your Business