Pressure had already been building for organizations to root out pay inequities that affect women and ethnic minorities. Now that the pandemic has upended business models, it is increasingly incumbent upon companies to do their part to help close the pay gap. Why? Because employees these days have more of the upper hand in terms of where they want to work and how much they expect to be paid. That goes to recruitment and retention.
So, you’ve smartly decided to conduct a pay equity analysis to, first, see what’s going on. Then you can go about, if necessary, fixing things at your company. But you shouldn’t just ram the analysis through. You want to take the necessary steps to ensure that the process is meaningful. Otherwise, you’re just going through the motions, wasting precious time, and perhaps sullying your reputation. To help you, here’s what you need to know about preparing to conduct a pay equity analysis.
What is Pay Equity?
Essentially, pay equity is compensating your employees the same for performing the same or comparable job duties while considering possible other factors including job performance, tenure, and experience level.
Why Should Pay Equity Matter to My Organization?
Beyond the fact that pay equity is in many ways a moral issue, you should care about what the situation is at your company because, for one thing, you don’t want to be sued, okay? There’s an inducement for you. But beyond that, by making sure employees are paid equitably, you can improve productivity, creativity, and efficiency. How? By attracting top talent and engendering loyalty to you.
What Should I Do Before Conducting a Pay Equity Analysis?
- Talk to an attorney. That’s right: before you get into the nuts and bolts of your analysis, it’s crucial that you understand all the legalities involved in employment issues. So, talk to a lawyer so that you “get” the legal context of your undertaking.
- Define what you want to do. What exactly are you looking for in your pay equity analysis? That needs to be clearly defined. Perhaps there’s a potential issue with gender-based pay equity among new employees who do comparable work, for instance. An outside consultant can help here.
- Make your compensation variable standard. Doing so permits your organization to draw comparisons among positions across regions or territories. One thing you can do in this area is convert all compensation into a single kind of currency, then use a logarithmic transformation for your compensation variable. That way, you can pinpoint percentage differences in pay, rather than absolute differences.
- Figure out how you’ll know if there are pay differences. This varies among companies and hinges on what variables you want to examine. If your outfit is small – fewer than, say, 50 employees – it may be impractical for you to conduct an analysis. But you still may want to look at compensation data. For instance, if your company has just a couple of women, or ethnic minorities, you’ll still benefit from knowing how their pay sizes up against their male, and white, counterparts, allowing for experience and job levels, etc.
Now that you know what you need to about how to prepare to conduct a pay equity analysis, you can proceed to see where your organization is in terms of paying folks the same for comparable work. We happen to recommend that you get outside help from a consulting firm such as Mercer that can offer an objective, expert, knowledgeable solution. Such a move will save you time and remove the margin for error.