Conducting a Pay Equity Audit

By Joseph
January 13, 2023

Conducting a pay equity audit is one of those ways a company can “do well by doing good,” as the saying goes. The issue of workplace pay equity is a persistent one, and it’s reared its head anew in the last few years. And now with the pandemic, which has given employees more leverage, figuring out whether there are differences in compensation that can’t be explained by factors such as tenure and performance, is particularly timely.

So, conducting a pay equity audit is smart business in terms of areas including recruitment and retention. Now’s the time to get every edge you can over the competition. After all, a Just Capital report found that of the 922 largest public U.S. companies, only 22% said they’d conducted a pay audit between 2016 and 2020. 

The Issue

Despite efforts to the contrary, women, and people of color earn less than white men for performing comparable work, which perpetuates itself when women and ethnic minorities are asked about their pay histories during job interviews, by the way. While you can’t solve the entire pay equity problem, you can root it out at your organization.

What is a Pay Equity Audit?

A pay equity audit is a way to check pay rates at your company for any differences related to gender or race, and even age and job description. It’s basically a way to close the wage gap and provide equal pay for the same work.

Why is a Pay Equity Audit a Good Idea?

We’ve alluded to some reasons, including helping organizations attract and retain desired talent by offering competitive pay and fair chances for advancement.

The other inducement is to protect yourself from prospective lawsuits. With so much attention on wage disparities, now is a good time to see what’s up at your company. And if you have neither the time nor the know-how to handle a pay equity audit yourself, we suggest enlisting the help of a consultant such as Mercer, which can handle the project without the everyday distractions business brings.

What are Some Tips for Conducting an Audit?

  • Clearly define why you’re doing this. For example, is it to find opportunity gaps within your enterprise? Your motivation will inform factors such as your methodology and timeline.
  • Pinpoint how your existing pay rates are determined. This will give you some basis for any current pay gaps.
  • Get the data together. This depends on the focus of your audit. At the very least, you’ll need job titles, grades, education levels, gender, race, starting salaries, dates of hire, and the like. Then, you’ll want to pull in other info such as experience levels, performance ratings, and punitive actions.
  • Compare the work of employees in similar roles. Make sure you know what “equal work” means in your state. Such definition may be broader than federal distinctions.
  • Analyze and assess. If it turns out that staffers who perform comparable duties aren’t paid the same wage, see if that can’t be explained by seniority, merit, production quality or quantity, or any factor other than gender.
  • Address any disparities. Then fold everything you’ve learned into future pay policies.

Conducting a pay equity audit is something you do need to do – sooner rather than later, to make it easy you can generate a paystub. Don’t let any fear of what you may find stop you from getting this out of the way. When you’re done, you’ll be so glad you did it. And ultimately, so will your investors and other stakeholders. You will have strengthened your business position, and yes, it is the right thing to do.

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