High pay is no longer the golden ticket for employees. According to a report by Josh Bersin, pay equity is 13 times more impactful on employee retention and engagement.  

The findings put organizations in a challenging position. Competitive pay is still important; however, the spotlight is on transparency and fairness. But here’s the crux, the same report also indicates that 95% of companies struggle with pay equity.

To overcome income disparity, organizations need to perform pay equity audits. In this blog post, we have covered the definition of a pay equity audit, its benefits, and how to prepare and analyze the results of a pay audit. ‍

‍What is Pay Equity

‍Pay equity is more than simply treating everyone the same. Pay equity ensures that all employees are paid fairly for their work, irrespective of their gender, race, or ethnicity. This translates as employees who perform similar jobs or have similar experience and qualifications should receive equal pay.
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‍What is Pay Equity Audit

A pay equity audit is a comprehensive analysis of an organization's compensation plans to ensure no pay disparities between employees. This process involves examining all aspects of an organization's pay structure, including base salary, bonuses, and benefits.

An equal pay audit is essential for organizations committed to creating a fair and equitable workplace. In recent years, the gender pay gap and other forms of pay discrimination have come under scrutiny from lawmakers, activists, and the public.

‍Preparing for a Pay Equity Audit

‍Here are the steps you must take to perform a pay equity audit:

1. Gather data: Gather data on employee compensation. This should include information on job titles, salaries, bonuses, and benefits for all employees.
   

2. Analyze the data: Once the compensation data is gathered it must be analyzed to identify any potential pay disparities. This analysis should consider job title, experience, education, and performance factors.
   

3. Identify potential explanations for pay disparities: If you identify pay disparities, try to understand the reasons behind them. For example, disparities may result from experience or education.  

4. Develop a plan to address pay disparities: The next step is to develop an action plan to address these disparities. This may involve adjusting salaries, bonuses, or benefits packages to ensure all employees are paid fairly.
   

5. Implement changes: Once a plan has been developed, implement the necessary changes to address the pay disparities.
   

6. Monitor progress: Monitor the compensation practices to ensure they remain equitable over time. This involves conducting regular pay equity audits using pay equity management software like Compport.

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Benefits of Conducting a Pay Equity Audit

Other than identifying pay gaps and taking actionable steps to address them, pay equity audit also has a significant impact on the workplace atmosphere:

Improving employee morale and engagement: When employees feel they are being paid fairly they are more likely to be engaged and motivated at work. This improves their morale, reduces turnover, and increases their performance.

‍ Promoting diversity, equity, and inclusion: Pay equity is critical to building a diverse and inclusive workplace. By conducting a pay equity audit, organizations demonstrate their commitment to promoting equity and fairness in the workplace.

‍ Mitigating legal and reputational risks: In many jurisdictions, pay discrimination is illegal, and organizations that engage in discriminatory pay practices may face legal and reputational risks. Conducting a pay audit helps organizations identify and address any potential legal or reputational risks.

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Laws Surrounding Pay Equity Audit

The laws surrounding pay equity audits vary depending on the jurisdiction in which an organization operates.  

In the United States, federal and state laws prohibit pay discrimination based on gender, race, ethnicity, and other protected characteristics. Some of the essential laws for pay equity audits in the US include the following:
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The Equal Pay Act: This federal law requires that employers pay employees of the opposite sex the same pay rate for substantially similar work.

Title VII of the Civil Rights Act: This federal law prohibits discrimination in employment based on race, color, religion, sex, or national origin.

‍State pay equity laws: Many states have pay equity laws that prohibit discrimination in pay based on gender, race, ethnicity, and other protected characteristics. These laws may also require employers to conduct pay equity audits or take other steps to address pay disparities.

EEOC reporting requirements: The Equal Employment Opportunity Commission (EEOC) requires certain employers to report pay data as part of their EEO-1 reporting obligations.

While there is no federal requirement for employers to conduct pay equity audits, many states have implemented their requirements. Consult a legal counsel to ensure your organization complies with all applicable laws and regulations.

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Conclusion

Conducting a pay equity audit is essential in promoting fairness and equity in the workplace. It helps organizations to build a more diverse and inclusive workplace, fostering a culture of respect and collaboration among employees.

However, conducting a pay equity audit is not a one-time event. Ongoing maintenance of the audit is essential to ensure that pay equity gaps stay intact over time.  

Regular pay audits are challenging with spreadsheets as they require significant manual effort to clean and organize vast amounts of data. On top of that, it creates confusion due to version control challenges.  

Compport offers a powerful alternative to cumbersome spreadsheets as it automates data integration, uses advanced analytics and visualizations, and monitors pay data in real-time. With Compport, you not only improve engagement and retention but also reduce the risk of legal issues.

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Find out how Compport can help you manage and promote Pay Equity, book a demo today!
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Frequently Asked Questions

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Q1. What is a pay equity audit?

A pay equity audit is a comprehensive analysis of an organization's compensation practices to ensure there are no pay disparities based on gender, race, ethnicity, or other protected characteristics.

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Q2. Why is a pay equity audit important?

A pay equity audit is essential for organizations committed to creating a fair and equitable workplace. It helps identify and address any existing pay gaps, improves employee morale and engagement, promotes diversity, equity, and inclusion, and mitigates legal and reputational risks.

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Q3. What are the benefits of conducting a pay equity audit?

Conducting a pay equity audit brings several benefits, including identifying and addressing pay gaps, improving employee morale and engagement, promoting diversity, equity, and inclusion, and mitigating legal and reputational risks.

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Q4. What are the legal requirements for a pay equity audit?

The legal requirements for a pay equity audit vary depending on the jurisdiction. In the United States, federal and state laws such as the Equal Pay Act and Title VII of the Civil Rights Act prohibit pay discrimination. Some states have additional pay equity laws and reporting requirements.

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Q5. How can organizations prepare for a pay equity audit?

To prepare for a pay equity audit, organizations should gather data on employee compensation, analyze the data to identify potential pay disparities, understand the reasons behind them, develop a plan to address disparities, implement changes, and monitor progress over time.

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