Pay Equity Is More Than A Buzzword In Today’s Workplace.

Pay equity is the practice of paying employees equally for equal work, regardless of gender, ethnicity, sexual orientation or other protected characteristics. Studies have shown that companies with pay equity are more profitable, have higher employee morale, and are better able to attract and retain top talent. As companies across the labor market become increasingly aware of these benefits, we will see more and more evaluate how they pay employees to ensure the achievement (or maintenance) of pay equity throughout their ranks.

This evaluation process is called a pay equity audit – and running this process isn’t as simple as it sounds. Pay equity audits require careful planning and thoughtful analysis to ensure accurate results. This article serves as a high-level guide to assist compensation practitioners preparing to perform a pay equity audit within their organizations.

What is the importance of achieving Pay Equity?

Pay equity is important because it ensures individuals performing the same job or work of equal value receive equal pay. It eliminates gender, race or other forms of discrimination which have been a significant issue within the workplace for many years. And if your company operates in a geography that is subject to pay equity legislation, it can protect you from any potential liability stemming from a lack of compliance.

Pay equity promotes fair and just working conditions, creating a level playing field where all employees are treated with respect and dignity. It also helps to improve the economy by reducing wage gaps, increasing consumer spending power, and boosting productivity.

Additionally, pay equity is essential for ensuring that businesses can attract and retain qualified professionals. Organizations that offer equitable pay can maintain a strong and diverse workforce while gaining a reputation as an employer of choice.

Overall, pay equity is crucial to building a more just and equitable society, where all individuals are valued and compensated fairly for their work.

How Do You Know If Your Company Is Paying Fairly?

The first step in auditing pay equity within your company is to gather the necessary data. This includes the compensation of all employees through payroll records or your HRIS. Once you have this information, you can begin to analyze it to see if there are any disparities in pay. At this stage you can compare the compensation for employees who are doing similar work or for employees who have similar qualifications.

If you find that some employees are paid less than others for doing the same job, you will need to investigate the underlying cause. It could be that the employees with lower salaries have less experience or tenure, fewer or lesser qualifications, etc. Or it could be that the employees with lower salaries are misclassified in their job category than the higher-paid employees.

Once you have determined the cause of any disparities in pay, it will be important to take corrective action to remedy them (which may include back pay!).  If the cause is experience or qualifications, you can provide training or development opportunities that would help close the gap. If the cause is job category, you can adjust salaries or update job titles and descriptions to better fit the differences in work.  Ultimately the goal is that all employees in similar roles with similar qualifications receive equal pay.

Don’t Stop at Pay Equity – Assess Employee Engagement.

Remember that when the data indicates you have pay equity, the pay equity audit effort isn’t done.  It is equally important to assess whether or not employees believe they are being paid fairly for the work they do. This is one of the many elements of employee engagement and is a critical test of longer-term pay equity “health.”  There are a few ways to accomplish this objective.

One way is to survey your employees. Conducting anonymous surveys provides employees the opportunity to answer compensation and equity-related questions honestly and without fear of retaliation. Responses from such surveys will provide insights on employees’ opinions and perceptions of their compensation – important perspectives for a sensitive topic like pay.  Running surveys will also provide knock-on effects for employees, as they will feel “heard” and more valued (as long as concerns are addressed over time).

Another way to audit pay equity is to evaluate job descriptions and compare them to actual in-the-job duties. This can help identify potential gaps driven by disconnects between the expectations and realities of a job title/level of responsibility which feed into employee perception. Further to this, companies should ensure pay opportunities are market competitive with the external labor market. It is imperative to review compensation opportunities against the appropriate external market on a regular basis to ensure such structures are competitive and effective in attracting, retaining and motivating talent across the organization.

Once gathered, this information will supplement the initial analytics and provide a comprehensive picture on the pay equity status within your organization. From here, strategies for change management can be developed that will ensure pay equity alignment going forward. Salaries may need adjustment in select positions or new job descriptions may need to be written to accurately reflect the work being done.

Whatever changes are made, be sure there is a corresponding communication strategy that delivers the message effectively to your workforce. More on this below.

You Are Ready to Take Action - Now What?

Clear and effective communication between managers and employees is key to success. Describing the work done by the company to ensure pay equity will build trust and drive engagement.

The following details best practices you can use to communicate the process:

  1. Start with the purpose: Begin the conversation by explaining why pay equity is important. Talk about the benefits of having a fair and just pay structure, and how this contributes to employee satisfaction, retention, and morale. Explain that the goal is to ensure that everyone is paid fairly, based on their skills, experience, and contributions to the company.
  2. Define what pay equity is: Make sure employees understand the concept and how it differs from equal pay. Explain that pay equity is about considering various factors such as education, experience, performance, location, and market conditions, and how those factors impact an individual’s pay.
  3. Be transparent: Employees want to know where they stand in the company’s pay structure. Be transparent with how pay decisions are made and share information that helps employees understand how their pay is determined. Consider creating a pay scale or chart that shows the pay range for each job position.
  4. Create an open dialogue: Encourage employees to ask questions or voice concerns about pay. Create a communication channel where they can raise their concerns without fear of retaliation. Be prepared to address concerns and make necessary adjustments to ensure pay equity.
  5. Train managers: Managers play a crucial role in ensuring pay equity. Train them on how to evaluate an individual’s skills, experience, and contributions, and how to use that information to determine a fair pay rate. Emphasize the importance of avoiding bias when it comes to pay decisions.
  6. Monitor and review: Pay structures are not set in stone. Monitor pay decisions and evaluate them regularly to ensure pay equity practices are maintained. Address any disparities discovered and continually improve the pay system.

By following these strategies, you effectively implement pay equity within your organization.  Fair and equitable pay practices, across the board, can lead to increased employee satisfaction and engagement, thus incentivizing and retaining a diverse workforce.  Essentially, pay equity is not only the right thing to do—it is also good for business.


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