Pay Equity Analysis Best Practices

Pay equity is something all companies and industries must strive towards. Paying everyone equally for the same effort, regardless of gender, race, or background, is not only morally upright, but it is also good business.

Ensuring pay equity is the first step toward economic equality. It can be difficult to know where to start to achieve pay parity, so a pay equity audit is an excellent place to start. A pay equity audit is an evaluation of your firm to find any pay disparities. The following are pay equity analysis best practices for conclusive results:

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Plan and Set Goals

The first question to ask is what is the goal of the pay equity audit? You may want to eliminate legal risks, update your pay practices or policies, follow shareholder commands, etc. An excellent reason to conduct the analysis is to reduce the pay gap and create a more equitable workplace.

It is essential to get leadership buy-in before conducting the audit. By doing so, you will be better placed to explain to management the purpose of the audit and more importantly, how it will benefit the firm.

A pay equity audit requires time, resources, and people. You will also need to coordinate with all departments in the company. Planning and setting goals to ensure you have the budget and capacity to properly perform the audit.

Evaluate Your Pay Practices and Policies


A pay equity audit must include analyzing your current pay practices and policies. Determine what your firm’s compensation and benefits package look like across the board. Start with the HR department, to know where the pay discrepancies are.

A pay equity analysis is a complex process that begins by knowing where you currently are. Start by setting a foundation by establishing if your current pay practices and policies are fair.

Differences in pay are justified if there is a seniority hierarchy, a merit system, or a system that measures the quality and quantity of production. Any other factor that affects pay must be related to the job or business necessity.

Define Comparable Work

A mandatory best practice to establish pay discrepancies is determining what comparable work at your organization means. Pay parity means people receive equal pay for doing the same work. According to state law, comparable work means work with similar skills, input, qualifications, and responsibilities.

You must perform a job evaluation to determine comparable work. The job description and title are not enough to establish comparability. Determine all employees doing comparable work at the firm and establish any pay discrepancies.

An excellent practice is to analyze comparable groups. For example, if you analyze a multinational corporation, you should evaluate employee pay in each country.

Ensure you get a large enough sample size for the analysis to get solid results from which you can draw adequate conclusions.

Use Statistics


As they say, numbers never lie so it is a good practice to use statistics to establish pay discrepancies. After establishing comparable work, you should collect as much data as possible. If analyzing a mid-sized or large company, the data can be overwhelming.

Therefore, you should use statistical models to determine the variance between various data sets. Statistics will show you the impact of each variable like gender, race, or working hours on pay.

Small differences may be insignificant, but when the variance is huge, you can investigate further because it signifies an issue with the pay structure. You may need to perform massive calculations, but you can certainly draw correct conclusions by using statistics.

Best Practices For A Pay Gap Audit

Conducting a pay gap audit is a long, complicated process that is seemingly never-ending. The above pay equity analysis best practices will help you have a comprehensive audit. By using them, you will draw accurate and conclusive results that will help your firm achieve pay equity.