Best Practice: Conducting a Pay Equity Analysis

Patricia Maniscalco — Tue, 01 Sep 2020 08:00:26 +0000

In our previous article, we have highlighted the importance of a pay equity analysis and have pointed out benefits for your business. Besides better retention and compliance with the law, it can also reduce the risk of a bad reputation. But still, the uncontrolled gender pay gap indicates that women earn 19% less than men showing that pay equity is still an issue within the workplace.

According to HR People + Strategy, only a 5% difference in starting salary ($50,000 to $52,000) can result in a $200,000 cumulative pay gap over a 40-year career. And this is exactly where the analysis of pay equity comes into play. It aims to eliminate overall wage disparities based on race, gender or other unjustified criteria.

In this article, we look at how you can conduct a pay equity analysis to eliminate these factors.

The Pay Equity Analysis

Conducting an annual pay equity analysis is an important tool for your business. When people hear the word pay equity analysis they automatically assume that it is about paying everyone equally. However, this could not be further from the truth. A pay equity analysis is a method of researching pay rates within your company. It can provide you with the information you need to identify pay disparities and opportunities to assure equal pay for work of equal value. The main objective here is to limit the risk and ensure compliance with federal and state laws.

To conduct such an analysis, it is advisable to set up an audit team of experts in human resources, payroll, finance and legal matters. This will ensure that the analysis is conducted in compliance with data protection laws.

	First, you will need to think about why you are doing an analysis. Do you want to stay ahead of regulation and law? Or do you want to improve your overall company policies and system around pay distribution? Writing down the purpose of your analysis will help you in the process of allocating needed resources (personnel, budget, time).
	The next step is to look at your current compensation model and process. This will help you to find the gaps in your system that may have led to pay disparities. Ultimately, the goal is to close those gaps within your compensation model by developing new pay rates and criteria.
	Now you will need to collect all data that is needed within the scope and purpose of the analysis. Data you most likely need are employment status, historical employment, demographic information, job details (level, full-time/part-time/responsibilities, compensation) and performance rate. Since this data contains sensitive & private information, data security & anonymity must always be guaranteed. In addition, it is recommended that certain sensitive data be removed before the data is transferred to another member of the audit team, which is not necessarily required for analysis, e.g. name & birthday.
	To gain better insight, group your data into job categories that you consider important for your analysis, such as similar departments, locations, full-time employees or job titles. Once you have grouped the collected data, you can now identify factors that may justify noticeable pay differences.
	Analyze your data by comparing the job descriptions of the job with the data you have collected about the people working in that job. Then compare employees with similar positions and responsibilities. Also, focus on your gender distribution within the jobs and how they are compensated. An example of a first analysis is to look at entry-level positions and compare the hourly rate.
	When you have analyzed the data, you may have found some discrepancies in the payment for work of equal value. You should pay attention to differences in the remuneration of people in the same positions, with good performance ratings or with the same experience and skills. You should also look more closely at high pay for an employee with very poor performance ratings. Assess whether these differences in pay are legally justified.
	Lastly, report any inequalities identified to the management team and to take immediate corrective action. This should include a discussion on whether the results should be communicated to all employees in public. However, affected employees must be informed immediately. Salary adjustments should be effective immediately to avoid the risk of penalties from the judicial authorities.

Overall, a regular pay equity analysis is highly recommended ensuring compliance with the law. It is very beneficial for creating a workplace where employees feel valued and have the confidence, that their company wants the best for them.

Contact us & find out more about how Novative’s services and solutions can help you to carry out a simple and efficient pay equity analysis.

The post Best Practice: Conducting a Pay Equity Analysis appeared first on Novative.

Pay Equity & its Benefits for Your Organisation

Patricia Maniscalco — Tue, 25 Aug 2020 06:34:08 +0000

For years, the legal landscape surrounding pay has become increasingly complex. Employers have to justify salary disparities between jobs of equal value.

However, it is no news that women earn 19 % less than men when comparing all working women to all working men. One reason for this is that women often work in professions that are known for their comparatively low income. As a result, women are clearly under-represented in the best-paid jobs – not to mention people of colour. To change this, human resource departments need to take corrective measures to achieve pay equity within their company.

In this first article, we highlight some of the benefits of conducting a pay equity analysis and how it creates a workplace of trust, enthusiasm & commitment. But first: What is pay equity?

What is Pay Equity?

Pay equity can easily be confused with equal pay. However, it is not about men and women earning equal wages in similar jobs. Pay equity means equal pay for work of equal value. This is why the analysis compares the value and pay of different occupations, such as a marketing specialist and IT specialist.

What is a Pay Equity Analysis?

When people hear the word pay equity analysis they automatically assume that it is about paying everyone equally. However, this could not be further from the truth. The analysis is a method of researching pay rates within your company. It aims to resolve the issue of undervaluation of occupations typically performed by minority groups of society. In general, this means that the analysis supports the elimination of overall wage disparities based on race, gender or other unjustified criteria.

Benefits of Pay Equity for Your Organisation

Pay equity analysis makes the alarm bells ring for many business owners and managers because of many associate costs with it. The result? Wages are not looked at or touched at all. However, when you check and compare the wages of all employees regularly it can provide you with many competitive advantages.

	It enables you to comply with the law and avoid penalties and potential wage discrimination lawsuits. In addition, you minimize the risk of employees talking negatively about their payment and treatment within your company. This could result in your brand & company losing its reputation and thus damage your business in case of any discrepancies.
	A regular analysis and adjustment of wages in case of unjustifiable disparities improves work ethics and reduces turnover. Your employees will have the confidence that you will take care of them and ensure pay equity. They will be more committed to the company, which will show in the quality of their work.
	During the analysis, you will also have a closer look at your job descriptions and requirements. This will probably lead to revising and updating them for future positions. The greater precision in the definition of requirements and tasks of the various jobs leads to a better match between the profile of the potential candidates and the job requirements. This, in turn, will guarantee competitive pay rates that attract new employees and lead to even higher retention and improved performance.
	You may also notice that in the past you have calculated your budget on the basis of wrong assumptions regarding tasks, projects & responsibilities of different departments. With the new insights into the distribution of tasks in the company, you can allocate the budget much more efficiently, because you know exactly who is responsible for what.

Overall, a regular pay equity analysis is highly recommended. It not only ensures compliance with the law, but it is also very beneficial for creating a workplace of respect and equality. Wait for the second part of this article on how you can conduct a pay equity analysis.

Contact us now & find out how Novative’s services and solutions can support you to carry out a simple and efficient pay equity analysis.