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Gender Pay Equality: Are You Paying Fairly?

As an employer, are you doing your part to close the gender pay gap? Here's how to ensure you're paying employees fairly -- and minimizing your risk of pay equity claims -- by conducting a pay equity audit:

Gender equality in the workplace is a hot topic currently, and nowhere is the focus more intense than on equal pay. Studies show that women generally receive $0.55 to $0.79 for every $1 their male co-workers receive for the same work in the same job.

Pay gaps can hurt your hiring, too. A recent Glassdoor survey found that 67 percent of U.S. employees would not apply for a job if they believed a pay gap existed at that place of work.

Employers have the power to close the gender pay gap -- and to build a strong internal culture of equity that attracts top talent by doing so. Here's how to create a fairer playing field and reduce your risk of pay equity claims by conducting a pay equity audit.

Why Do You Need a Pay Audit?

A pay audit typically has two goals:

  1. To spot pay disparities that can't be explained by legitimate and relevant factors; and
  2. To spot problems with the company's compensation practices that might cause or exacerbate these disparities.

To meet these goals, a pay audit analyzes a company's pay data. For instance, auditors may compare mean, median or modal pay of men and women (or of any other protected groups included in the audit) within relevant job classifications. In some cases, comparing an individual employee's pay to others in the same job classification may be necessary or useful.

By moving proactively to identify problems via an audit, companies can then take steps to correct those issues -- before they become the subject of a lawsuit.

Need to conduct a pay audit? The CPI Group, LLC. can help you re-evaluate pay rates for key roles in your organization -- to attract and retain great people.

Staying Relevant: Why Job Classifications Matter

The phrase "relevant job classifications" matters when conducting a pay audit, since both federal and state laws require pay to be compared in jobs that are also comparable.

For instance, the federal Equal Pay Act requires that comparisons be made of employees whose work requires equal skill, effort and responsibility, and who perform their work within the same establishment under similar working conditions. The California Fair Pay Act requires comparisons of "substantially similar" work in terms of the work's skill, effort and responsibility.

Under both laws (and many similar state laws), simply comparing job titles isn't enough. The actual work done by each position must be the same or similar, as well. As a result, it's important to think of job classifications as somewhat different from job titles -- and to dig into what each worker actually does every day in order to make meaningful comparisons.

What Makes Pay?

In addition to accounting for what each worker actually does, you'll also need to account for the relevant factors that contribute to compensation decisions. While these vary depending on the industry, organization and job, they often include items like:

  • Seniority (date of hire and time in position)
  • Salary/pay grade
  • Educational background
  • Experience
  • Performance

As a rule, the results of a pay equity audit will be more useful the more factors they include. For instance, an analysis that compares only pay based on performance may miss inequalities that have been "baked in" to the company's seniority system -- or vice versa.

It's not unusual for a pay equity audit to reveal some disparities. It's important, however, to analyze whether these disparities are statistically significant -- or if they could be the result of random chance.

When Statistically Significant Pay Disparities Appear

If the analysis reveals statistically significant pay disparities, it's time to dig deeper. For instance, companies can ask questions like:

  • What specific achievements, if any, contribute to pay in this position? (Common examples include sales revenues earned, patents filed or works published.)
  • Is pay higher in this position because the position is notoriously difficult to fill? What data demonstrates that this is a tough-to-fill position?
  • How are our current pay policies enforced, and how might those actions cause or contribute to these disparities?

Reviewing policies and procedures is an essential step to ensuring that pay disparities do not perpetuate themselves, since perpetuation can leave an organization exposed to a higher risk of pay equity lawsuits.

Note: This article is intended to provide only general guidelines, not legal advice. If you have specific questions, talk to an attorney who is licensed to practice law in your area.

Need expert salary advice? Assistance with offer negotiations? Temporary support? Exceptional candidates? Call The CPI Group, LLC..