Fair Pay is Fair Play: A Pay Equity Audit Ensures Compliance with New Laws

By Cori McClish on May 30, 2019
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Fair Pay is Fair Play: A Pay Equity Audit Ensures Compliance with New Laws

To try to equalize compensation between male and female employees and people in other protected classifications, fair pay laws are gaining traction in states and cities. The nation’s renewed focus on pay equity means employers of all sizes can expect increased scrutiny of their employee wage decisions. In fact, many states and municipalities have already passed laws making it illegal to ask a job candidate, “What’s your current salary?” 

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The goal behind salary history bans is to stop the cycle of pay discrimination. For example, if a new hire's salary is solely based on previous pay, and the individual was paid less than others performing similar job duties, then the past discrimination just continues.

But states and municipalities aren't the only ones cracking down on the gender pay gap. Congress is currently considering a nationwide ban on salary history inquiries. The Paycheck Fairness Act was introduced by Rep. Rosa DeLauro, D-Conn on January 30, 2019, and was placed on the Senate Legislative Calendar on April 30, 2019. 

Cori McClish Quote

The Paycheck Fairness Act would:

  • Prohibit employers from inquiring about salary history and from using it to determine pay.
  • Protect workers against retaliation for discussing pay with co-workers.
  • Ensure equal pay for equal work by requiring employers to prove that any pay disparities between men and women are a business necessity and job-related.
  • Require employers to prove that any pay disparities between men and women are a business necessity and job-related.
  • Provide plaintiffs who file EPA claims the same remedies available to plaintiffs who file race- or ethnicity-based wage-discrimination claims.
  • Make it easier for plaintiffs to participate in class-action lawsuits that challenge systemic pay discrimination.
  • Create a salary negotiation skills training program for women.

Conducting a pay equity audit will help ensure you’re complying with the law where you do business – and provide useful insights into your existing compensation practices. Further, rectifying any pay disparities an audit reveals will limit your exposure to discrimination claims and potentially costly settlements.

diversity equity and inclusion changes to make in your workplace

Identifying Pay Disparities

The federal Equal Pay Act (EPA) prohibits employers from paying workers of one sex less than the other for performing substantially the same job unless the pay difference can be justified by a:

  • Seniority system
  • Merit system
  • A system that measures pay by the quantity or quality of production
  • A differential based on a factor other than sex

A pay equity audit that compares the rate of pay for men and women based on position and grade can help you eliminate pay gaps. During an audit, analyze pay data to determine whether employees with similar backgrounds performing similar work are being paid similar wages.

Pay disparities – that is, statistically relevant differences in pay that are unlikely to have occurred by chance – often are not the result of intentional discrimination, but rather of weaknesses in employer practices. Auditing compensation data can reveal these flaws and give you the information you need to make improvements.

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Conducting a Pay Equity Audit

  1. Identify the factors that influence your pay rates, such as date of hire, years of experience, education, and location.

  2. Pull human resources data, including gender, job title, salary grade, performance information, and other variables relevant to employee pay. The more factors you can include, the more robust and helpful the results will be.

  3. Create a spreadsheet, leverage pay equity software, or use another means to compare the data points you’ve gathered.

  4. Perform statistical analysis of male versus female employees to compare the rate of pay for men and women in similar positions. Make sure to group together employees who perform like duties, even if their titles or positions vary.

  5. Evaluate all positions in the same grade or department using similar benchmarks and scoring rubrics.

  6. Look for factors other than sex or any other protected category that would explain pay differentials, such as the EPA exceptions noted above.

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After the audit, employers should consider modifying existing compensation procedures and adjusting the salaries of employees who are inexplicably paid less than their peers. Consider involving legal counsel to help protect pay equity analysis results from discovery during litigation or a government audit.

And, remember, a professional employer organization can handle the audit for you and ensure compliance with all new pay equity laws and every other employment statute governing the workplace, so you can concentrate on growing your business.

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Written by Cori McClish

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