Pay Equity Analysis

Establish and maintain equitable pay practices.

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Pay Equity Compensation Consultants

What is Pay Equity?

Pay Equity is ensuring the absence of pay discrimination based exclusively upon an individual’s protected class, such as age, sex, gender and/or ethnicity. In other words, an individual’s controllable differences, such as performance, education, experience, etc. are what should determine differences in pay.

This is an important topic for companies to understand as they make decisions on paying their employees. Companies can quickly find themselves in litigation with enforced pay equity laws, such as The Equal Pay Act of 1963, Title VII of The Civil Rights Act of 1964, and The Lilly Ledbetter Fair Pay Act of 2009. Additionally, many states have implemented their own pay equity laws and it is up to companies to keep abreast and ensure compliance to mitigate litigation risk.

Why is Pay Equity Analysis Necessary?

If unjustifiable pay discrimination is proven to exist within the company, it will likely cause a domino effect of negative consequences stemming from the loss of key talent and tarnished reputation. As such, establishing a system for determining pay and pay changes, as well as tracking and monitoring such records, will help position the company to avoid such outcomes and provide transparency for justifiable differences in pay.

What is a Pay Equity Audit?

A Pay Equity Audit researches a company’s internal pay structure and jobs to provide accurate analytics and findings. As an independent consultant, NFPCC can conduct an honest and objective review of your pay structures to determine the possible existence of pay discrimination within your company and even identify fact patterns potentially trending in the direction of pay discrimination so you can rectify before it happens.

NFP Compensation Consulting works with your HR team, internal legal and outside counsel to conduct a pay equity audit.

Our Pay Equity Audit process includes:

  1. Identifying which employees are performing similar or comparable work. This should not be confused with equal work, as comparable is a more broad definition. This stage is where the importance of proper job titling and job descriptions is realized.
  2. Analyzing data based on the job groups identified in step 1. In recent years, most companies’ pay equity analyses have centered around gender inequality and addressing the gender pay gap. While this is certainly an area of focus, ensuring all protected employee classes are similarly assessed is important. This is a simplified analysis, reviewing the salaries of one employee versus the next based solely on gender, race and age.
  3. Application of unique individual factors which impact compensation levels, e.g.: experience, tenure, education and performance. This process is more complicated and requires the application of specialized scoring methodologies which aid in ranking employees within each job group.
  4. Identifying and assessing pay discrepancies relative to federal and state laws to ensure they are justifiable. Although other reasons exist, the majority of cases justify pay differential if it can be demonstrated that the variance is attributed to:
    1. a seniority-based system,
    2. a merit-based system, or
    3. a method which quantifies earnings or quantity or quality of production.
  5. Documentation and taking corrective action where necessary. It is highly probable that discrepancies will be identified. These will likely be minimal and the impact marginal, but adjustments will likely need to occur.

Manage litigation risks and gain a competitive advantage in your industry by establishing equitable pay practices and maintaining pay equity compliance. Fill out the form below to get started with your pay equity audit.

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