Pay equity analysis refers to the systematic evaluation of compensation across an organization to ensure that employees receive fair pay for work of equal value.
It’s not just about ensuring equal pay for identical roles — it also involves assessing the value of different jobs that require similar levels of skill, effort, and responsibility, ensuring comparable worth is accounted for.
Today, pay equity analysis is a critical component in discussions about diversity, equity, and inclusion in the workplace. For most businesses, a pay equity analysis involves examining more than just gender or other common demographics; it’s a comprehensive process that identifies pay gaps and persistent inequities within an organization, providing actionable insights for addressing them.
We’ll describe what a rigorous pay equity analysis requires, the challenges organizations face in conducting them, and how to conduct your own. We’ll also share a few common pay equity analysis tools and templates that can help you out.
Pay equity analysis is the process of examining compensation practices to ensure that employees performing similar work are compensated fairly, without unjustified disparities.
The process begins by collecting comprehensive data on salaries, job titles, demographics, education, experience, and performance metrics. Employees are grouped into comparable roles to enable meaningful comparisons, followed by advanced statistical analysis to isolate legitimate factors—such as experience and education—that may affect pay. This helps identify any unexplained gaps that require attention.
Pay equity analysis is often spurred by legal requirements, but many organizations also find that the exercise is helpful in enhancing employee satisfaction and retention, mitigating financial risk, and supporting talent strategies to foster a high-performing workforce.
A thorough pay equity analysis does more than identify salary disparities—it lays the groundwork for fair, transparent compensation practices and helps organizations align with their equity and inclusion goals. By examining key questions, companies can uncover actionable insights to close gaps, mitigate bias, and foster a culture of fairness.
Here are some essential questions to consider:
Answering these questions not only identifies inequities but also equips organizations to address disparities effectively and track progress toward a more equitable workplace.
Conducting a pay equity analysis is a complex process that goes far beyond reviewing salaries. It requires a meticulous approach to gathering, categorizing, and interpreting data while navigating evolving compliance requirements. Learn the four key challenges organizations often encounter when undertaking this critical task.
The first hurdle in a pay equity analysis is consolidating data scattered across multiple systems. Payroll, HR, and performance metrics often exist in separate databases, making it difficult to create a unified view. Without consistent and centralized data, the analysis risks inaccuracies that could undermine its effectiveness.
Accurate pay equity analysis relies on clearly defining and comparing job roles to determine “substantially similar work.” This can be challenging in organizations without standardized job classifications, leading to inconsistencies in evaluations. Establishing consistent criteria is essential for fair and meaningful comparisons.
Using manual tools like spreadsheets for pay equity analysis introduces significant risks. Errors in data entry and limited traceability can compromise the reliability of findings. Additionally, a lack of robust audit trails makes it difficult to explain or justify decisions, hindering accountability and compliance.
Pay equity laws and regulations vary widely by jurisdiction and are subject to frequent updates. Ensuring that your analysis aligns with these requirements is a constant challenge. The process requires tools and expertise to stay ahead of regulatory changes while maintaining accurate reporting.
By addressing these challenges, you can transform pay equity analysis into a streamlined, effective process that delivers actionable insights and supports equitable compensation practices.
A successful pay equity analysis starts with a clear, structured approach to data collection, analysis, and action. Explore the key steps in the process, along with tools and templates designed to streamline implementation and drive meaningful results.
The first step is to identify and gather the necessary data. This includes payroll information, HR records, and job categories. It’s crucial for you to identify pay issues across job levels and assess pay for equal work accurately.
Accurate job evaluation and job categorization are essential for assessing equal pay rates for men and women doing the same or similar work. Proper categorization ensures that employees in substantially similar roles are compared fairly.
Once the data is prepared, the next step is to analyze it for disparities. This involves conducting regression analysis or other methods to identify significant gaps in pay among employees in similar roles.
Communicating findings is a critical step in achieving pay equity. HR teams must share results with executive leadership, HR professionals, and even regulators in some cases. Custom dashboards can help facilitate tailored communication for each audience.
Pay equity analysis is not a one-time task; it requires continuous monitoring and adjustments to remain compliant with evolving regulations. Keeping your analysis up-to-date fosters a workplace culture built on fairness and transparency.
A variety of tools are available to perform pay equity analyses.
Specialized platforms for pay equity reviews are designed specifically for analyzing and addressing pay disparities. These tools offer real-time analysis, compliance tracking, and actionable recommendations for closing pay gaps.
Tools like Microsoft Excel and Google Sheets are flexible, cost-effective options for creating basic to intermediate pay equity analysis spreadsheets. With functions like pivot tables and statistical formulas, they allow organizations to track, compare, and visualize compensation data. Pay equity analysis Excel templates can be found in the Leaders for Equity and Equal Pay (LEEP) Toolkit, a pay equity analysis spreadsheet resource designed to help small and mid-size employers (fewer than 400 employees) conduct in-house gender and racial pay equity reviews.
Online calculators can also help businesses move toward pay equity and address biases. For example, the Gender Pay Gap Calculator by the Economic Policy Institute is an interactive tool designed to help employers understand the gender pay gap’s impact within their organization. By inputting specific factors such as gender, age, and education, employers can see the economic effects of pay inequity.
Visualization platforms such as Tableau and Power BI help users create interactive charts and dashboards to explore and communicate pay equity data effectively. These tools make it easy to spot trends across demographic groups and job functions.
Languages like R and Python are widely used for advanced statistical analysis, allowing organizations to conduct regression analyses and identify pay gaps based on multiple factors. These tools are ideal for data teams comfortable with coding.
Many HR systems include built-in pay analysis features, integrating pay equity analysis with broader HR and compensation data. They help HR teams monitor and adjust salaries across departments and demographic groups.
Different datasets spread across different systems are the greatest challenge to pay equity analysis. Acterys workforce planning and analytics software is an advanced data integration and analytics platform that helps employers solve that problem by combining data from multiple sources such as payroll and HR systems. It provides a unified view of compensation data, ensuring accurate and complete pay comparisons.
With tools like Acterys integrated with Power BI you access real-time analytics and custom dashboards, allowing employers to easily visualize pay disparities and make data-driven decisions. It also supports ongoing compliance with audit trails and secure data processing, making it easier to maintain fairness and demonstrate accountability.
Explore how Acterys can help you further your pay equity goals.
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