What is Salary Equity Analysis and How To Conduct One?

According to a recent study by the World Economic Forum, organisations that take steps toward pay equity experience a 25 percent increase in employee satisfaction and retention. However, many face challenges when implementing fair pay practices. A pay gap doesn't only harm morale but can also expose an organisation to risks of lawsuits and reputational damage.

Salary equity analysis is a powerful tool to identify and resolve disparities, ensuring that your compensation practices are fair and competitive.

In this detailed guide, we’ll cover:

• What pay equity means.
• The importance of salary equity analysis.
• A step-by-step guide to conducting equity analyses.
• How innovative equity analysis tools like CompUp simplify the process.

Let’s break it down for you HR professionals striving for workplace fairness with efficient equity efforts.
 

What Is Pay Equity?

Pay equity means fairly compensation decisions for each employee according to his/her job titles, job role, skills, experience, and contributions toward the organization. It ensures that in jobs of comparable worth, employees are rewarded comparably, aligning with the standard of your equitable workplaces, within industry and hence ensuring similarity to that prevailing in the market.

"For an HR professional, pay equity regulations are not just compliance but a reflection of what the organization wants to be and express towards the world in terms of fairness and inclusiveness."
 

Why Carry Out Salary Equity Analysis?

Carrying out a salary equity analysis provides a number of significant benefits:

• Satisfaction of Legal Requirements

  Equal pay laws around the world call for fair compensation policies. Pay equity analysis will therefore satisfy these legal compliance and protect organisations from legal actions such as monetary litigations and fines.

• Increased Employee Trust and Engagement

  When employees believe pay is equitable, trust in the organisation increases and the employee is more likely to be engaged, productive, and loyal.

• Attracts and Keeps Talent

  Competitive rates and equitable pay structures strengthen your employer brand and allow for attraction of talent that can help reduce turnover and improve performance reviews.

• Strengthens Organisational Reputation

  Social responsibility demonstrated through commitments to pay equity fosters goodwill among stakeholders and helps enhance public image.
   

Key Concepts of Internal and External Pay Equity: 
 

• Internal Pay Equity

  This is analysing and comparing pay in the organisation to determine fairness of people doing the same job or those with similar experience levels.

  Example: Are two senior software engineers with equal experience and performance history being paid the same?

• External Pay Equity

  This compares your organisation's pay scales to the market and industry standards to position your organisation fairly within the labour market.

  Example: Are your salaries for sales managers aligned with what other companies in your sector are offering?

Balancing internal and external equity creates a cohesive, competitive, and equitable compensation strategy.
 

How to Conduct a Salary Equity Analysis: A Step-by-Step Guide

Conducting a salary equity analysis requires a structured and detailed approach. Here's how to do it effectively:
 

Step 1: Collect Comprehensive Data

Collect accurate and relevant data to clearly ensure a view of the pay practices of today. Some basic facts to gather are:

• Employee Details: Gender, ethnic, age, and tenure.
• Job Information: Title, levels, and role descriptions.
• Employee Compensation Data: Base pay, bonuses, stock options, and benefits.
• Performance Metrics: Ratings, feedback, and history of promotions.
• Industry Benchmarks: Competitive salaries for comparable jobs in the marketplace.

Investing in an advanced HR management system can expedite the process by consolidating data.
 

Step 2: Categorise and Analyse Data

Once data is gathered, categorise it so that it can be analysed meaningfully. Classify employees into different groups based on their:

• Job level or grade.
• Department or function.
• Geographic location.
• Apply statistics to look for patterns and distribution imbalances. Regression analysis might help identify whether gender or ethnicity explains pay variations.
   

Step 3: Conduct Pay Equity Audits

Audits are the backbone of identifying inequities. Perform:

• Internal Equity Audits: Compare pay across employees in similar roles to identify gaps within the organization.
• External Equity Audits: Benchmark your pay structures against industry standards to ensure competitiveness.

Best Practice: Engage a third-party auditor for an unbiased assessment, which can add credibility to your efforts.
 

Step 4: Develop and Implement Corrective Strategies

Once gaps are found, implement swift and clear remedial steps:

• Salaries: Equalise underpaid employees.
• Policies: Update or revise discriminative or obsolete pay structures and equity practices.
• Managers: Educate them about fair pay practices to avoid the same situation from arising again.
• Transparency: Explain reasons and remedial actions undertaken to your employees, thereby regaining their trust. 
   

Step 5: Monitor, Measure, and Sustain Equity

Equity is not something that happens once. To sustain it:

• Monitor Progress Periodically - Regular audits keep checking whether pay practices remain discriminatory.
• Use real-time analytics to spot disparities as they happen.
• Encourage a culture of transparency where employees will feel comfortable raising pay concerns.
• Benchmark frequently against market data to stay abreast with the market.

• Having a proactive approach ensures your organisation remains committed to fairness and compliance.

   

How CompUp enters the Picture

As the intricacies of salary equity analysis increase, tools like CompUp become vital for HR leaders. CompUp streamlines and helps handle data-driven insights and automation, while giving organisations an edge when it comes to compensation management.

1. Transparency in Compensation

• Structured Pay Frameworks: CompUp assists in creating clear and highly competitive pay structures that build trust with employees making it a fair workplace.

• Real-Time Analytics: Track salary trends and industry benchmarks to proactively address inequities.
   

  

   

2. Fair Pay Gap Analysis

• Data-Driven Insights: CompUp pinpoints disparities in the demographic factors, roles, and locations to ensure that the HR team follows a focused approach.

• Automated Reviews: Continuous pay equity assessment without much manual intervention ensures continuous fairness.
   

  

   

3. Compensation Benchmarking

• Peer Comparisons: Keep yourself abreast of industry standards to stay competitive and retain the best talents
   

  

  
   

4. Flexible Budget Planning

• Scenario Simulations: Assess retention risks and make efficient allocation of resources for key equity issues.

• Strategic Moves: Rationalise pay changes, bonuses, and rewards to the fullest extent.

  

   

CompUp  can be your ultimate partner in the pursuit of fair compensation practice. Its deep tools and analytics make every step in the salary equity analysis light and easy for HR leaders to drive clear, effective, and balanced pay structures.

Conclusion

Salary equity analysis lies at the heart of fair and strategic HR practices. It helps build an even keel of trust, fosters inclusivity, and leads to sustainable growth and development.

By equipping yourself with robust tools such as CompUp, you may not just navigate but excel within the complex landscape of compensation management. Book a demo today and get started.