The Advisors' Blog

Today, I’m sharing more from this Zayla Partners article on conducting a thorough pay equity audit. (See yesterday’s blog for a description of the tools and methodologies for the compensation analysis.) The article lists the following key phases of most pay equity audits:

– Step 1: Set goals and get leadership involvement. Outline the reasons for conducting the audit, expected outcomes, required resources, and executive support needed. Educate leaders on the business case for pay equity.
– Step 2: Review existing policies and practices. Look closely at current compensation structures, job frameworks, salary bands, and pay setting guidelines through an equity lens. Identify process gaps that allow inequities.
– Step 3: Collect and clean employee compensation data. Gather pay data on base salaries, bonuses, equity awards, and other monetary benefits for all employees. Remove names and personal identifiers, standardize job titles and framework levels.
– Step 4: Analyze for statistically significant pay gaps. Leverage tools like multiple regression analysis to reveal pay disparities across gender, race, tenure, and other variables. Do this while controlling for legitimate causes of pay differences like performance ratings, education, experience, and job level.
– Step 5: Conduct an in-depth qualitative analysis. For high-risk employees flagged by the analysis, look deeper into performance reviews, qualifications, responsibilities, and other factors. Confirm whether legitimate business reasons explain pay differences.
– Step 6: Identify root causes and make action plans. Uncover policies, processes, or cultural dynamics that make for inequities to persist. Define concrete remediation plans made to address the root causes, including pay adjustments, process changes, training, and accountability mechanisms.
– Step 7: Put your solutions in place and follow-up. Execute remediation plans, communicate with employees, re-run audits, review progress, and refine actions as is necessary. Doing regular audits and ongoing monitoring prevents new inequities from developing.

The article then goes into more detail on steps 6 and 7 — the work that follows the compensation analysis — including developing an action plan and remediation strategies, like compensation adjustments, job level realignments, and succession planning, strengthening hiring and pay-setting practices, and increasing pay transparency — plus ongoing pay equity strategies to maintain fairness.

This and other resources — including our “Checklist: Pay Equity Data Collection and Interpretation,” which addresses legal considerations to consider upfront — are posted in our “Gender & Racial Pay Equity” Practice Area.

– Meredith Ervine