How to Conduct a Pay Equity Audit

Author: Brightmine Editorial Team

Introduction

As more employers adopt diversity, equity and inclusion goals as part of their organizational mission, ensuring that employee compensation does not perpetuate inequality along the lines of race, gender or other protected characteristics is a critical step toward realizing those goals. At the same time, a rapidly growing number of state and local laws intended to reduce pay disparities between similarly situated employees complicates the task and increases the risk of missteps. Failing to identify and correct pay inequities can lead to lawsuits, monetary penalties, increased turnover, low employee morale and other consequences.

Pay equity audits can be an important part of the solution. However, a poorly conducted audit - or one whose results are never addressed - can be as harmful as never conducting an audit in the first place. For this reason, pay equity audits must be conducted with care; identifying goals and selecting the appropriate tool are critical steps.

The following steps will help an employer systematically evaluate the compensation of employees across demographic categories and examine the variables that influence pay in order identify and close unjustified pay disparities.