By Bill Swan, Principal Consultant
Although much has been done in recent years to address the disparity in wages by gender, in the US, there is still considerable work to do. In 2024, in the US, women are still paid 16% less than men. While this is better than some Organization for Economic Cooperation and Development (OECD) countries like South Korea (30%), Latvia (25%), and Japan (21%), it lags behind countries such as Italy (3%), Sweden (7%) and Australia (10%). While the gap varies amongst occupations, this post will focus on how to identify inequitable compensation and achieve pay equity within your company’s payroll practices.
Why is this important? Identifying inequitable compensation is important for maintaining fairness, boosting employee morale, and staying compliant with legislation. Here are the steps to discovering inequities in your organization and how to address them.
Table of Contents
Start with Comprehensive Data Collection
You can’t address pay gaps without good data. Collect information on base salaries, bonuses, overtime pay, benefits, and all other forms of compensation. It would help if you also had detailed job descriptions with duties and responsibilities, performance evaluations of individual contributions, and external market data from your industry. All these factors play a role in understanding and evaluating compensation.
Analyze Compensation Across Roles
Once you’ve gathered the data, it’s time to dig in. Compare salaries and compensation packages for employees in similar roles with comparable experience. But remember, job titles alone do not cover this – dig deeper into the job responsibilities and duties. In this analysis, examine compensation across gender and other protected classifications such as race. Ask yourself:
- Are pay ranges for different job levels appropriate and competitive?
- Are the pay differences justifiable for legitimate business reasons?
- Would your argument be defensible?
Examine Factors Influencing Pay
Several factors influence compensation. Consider the required skills, education, and experience for each role, as well as individual performance and contributions to the company’s success. Market factors such as industry trends and geographical location also play a role in shaping pay. Additionally, review your company’s policies on compensation, bonuses, merit increases, and promotions, both past and present.
If you find pay gaps between employees in similar roles, investigate the underlying reasons. Look for patterns of pay discrimination based on protected characteristics like gender and race, and ensure any differences are backed by clear, legitimate business reasons.
Investigate the Root Cause
As part of your investigation, it’s essential to speak to people across the organization, including the impacted employees, to get gain a well-rounded perspective. Consulting with external experts may also be necessary to ensure a thorough and objective review.
Take Corrective Action for inequitable compensation
To close pay gaps, adjust compensation where necessary. It’s also crucial to review and update company policies and practices to prevent future inequities. Training managers and other decision-makers on pay equity and ongoing monitoring of compensation practices will help maintain fairness and avoid discrimination moving forward.
Identify and Resolve Inequitable Compensation with Fit HR
By following these steps, companies can identify and address inequitable compensation practices, foster a fairer and more equitable workplace for all employees. If your organization needs support in this area, FIT HR is here to help. Let’s discuss how we can partner to achieve pay equity in your organization – contact us today!