Understanding the value of a pay equity assessment

Pay Equity
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While recruitment takes an increasing amount of time as your company grows, pay gaps can grow further throughout your teams if you don’t track them. These gaps can hurt your culture and employee’s satisfaction towards your company, which could lead to unplanned attrition in key roles.

Conducting a pay equity analysis and using available methods will allow you to identify potential gaps in your compensation policies and make adjustments for your upcoming review cycle.

Why it matters

Pay equity can be leveraged to show your compensation philosophy and consistency  in your practices, which enhances employee trust, recognition and stronger employer brand. However, small inequities only gets bigger over time if not handled.

According to Eurostat, the average gender pay gap still sits at 13% across the European Union. Hence, the European Commission is calling for increased pay transparency with the approved EU pay transparency directive.

Analyzing pay equity to identify potential gaps

To take care of pay equity, you first need to understand if potential gaps exist and whether they are justified with unbiased criteria. And if they are not justified, a plan should be drafted to address them.

With future changes in terms of employee headcount, it may be more difficult to track inequities. Thus, it is critical to structure the right processes and understand how compensation decisions affect pay equity in your organization. With the right tools, you can quickly identify potential gaps that are not explained by factors like tenure, location or performance.

Below, you will find several ways where pay equity can benefit your company:

Maintain best practices in your compensation philosophy with enhanced gender equity

It is always useful to review the impact of your compensation practices towards internal pay equity, as it would show whether your practices are in line with your values and would help bring proactive measures to reduce gaps.

Using a unified compensation platform allows you to see the impact of each decision on your internal equity metrics, and you will avoid being surprised of bigger pay inequities to solve.

Drive more accurate internal equity assessment

Analyzing inequities can sometimes be tricky if you don’t use the right peer groups or don’t compare data with similar roles/levels. And if you are a smaller company, chances are that your dataset is not big enough to conduct a strict regression analysis.

Having the right tool to get notified when potential gaps are identified based on company’s pay equity objectives (i.e. below 5% gender pay gap for instance) will allow you to easily determine if inequities exist.

Comply with upcoming pay transparency directives

As the European Commission is calling for increased pay transparency and that EU pay transparency directive was approved, new national legislations would provide a framework for identifying unexplained pay inequalities and give workers access to relevant pay information to further drive pursuit of fairness. Companies will also need to take corrective measures if the gender pay gap exceeds 5% without justifications.

Having a simple way to monitor, manage and share your compensation philosophy to your employees will help your company show your commitment towards pay equity.

Improve recognition and talent retention

A strong compensation structure can help employees alleviate doubts about their career growth, promotion criteria and increase cycles based on unbiased factors such as performance or position within the pay range.

In addition, clear communication of your policies will help your employer brand being stronger internally and externally.

Structuring your analysis

The following items should help you kickstart and structure your pay equity analysis within your organization:

  • Analyze your current pay structure and compensation practices regarding pay ranges, increase decisions, pay equity objectives, etc.
  • Review your goals towards pay equity, so you have targets to aim for in the analysis.
  • Compare the pay of employees who are “comparable in terms of role, level, location”. If you already have pay ranges, then you could consider retrieving the same groups. Make sure to review these groups though, as individuals who are comparable today were not always and vice versa.
  • Implement repeatable practices your company should use to correct any non-justified internal inequities (merit matrix, specific recommendations).

Promote active monitoring of pay equity

Your company may change in size or be expanded across multiple locations, so having a unified platform to make data-driven decisions is a great way to streamline these analysis. The right tooling will allow to access relevant compensation metrics and identify inequities in a easy manner.

With a structured compensation philosophy, your company will progress towards consistent processes and thus, will better recognize your talents.