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You Conducted A Pay Equity Audit. Now What? (3 Steps)


Welcome to my weekly Q&A feature. (Scroll down for the Q&A.)


If this is your first time here, welcome. I spend a fair amount of time speaking at events and conferences. At the end of my presentations, I leave space for audience members to ask questions—tough questions, brave questions, you name it. The level of candor and curiosity always inspires me, and I want to share that sentiment with you. Each week I pick one question that I believe others would find most instructive and publish my response to it here.


The purpose of this weekly tradition is transparency and inclusion.

  • Transparency: a behind-the-scenes look at my day-to-day.

  • Inclusion: bringing you along for the journey.


Be Brave™

 

3 Steps To Take After A Pay Equity Audit


Question:


What are your recommendations for steps 1, 2, and 3 after a pay equity study is completed and data is in hand?


What’s on your mind? ​Ask your question here for a chance to have it answered in an upcoming edition of this newsletter.


Answer:


Pay equity is not a recipe with a clear beginning and a definitive end. Pay equity is an always-on, ongoing process. Sure, there are steps 1, 2, and 3, but the work is never complete. Let’s review 3 key points before we talk about the post-pay equity audit process.


3 Important Details About Pay Equity Audits


1. Pay equity studies are static.

Every human capital decision can change the state of pay equity at your company. Promoted someone? Hired someone? Fired someone? You’ve just outdated your pay equity audit.


2. Pay equity studies are singular.

Pay equity is one way to measure diversity, equity, and inclusion. It’s a KPI, not the KPI. Other KPIs to measure DEI include rates of promotion, bias in performance reviews, and leadership representation.


3. Pay equity studies are descriptive.

They describe the “what.” What is happening? They don’t explain the “why.” Why is there a pay gap? And more importantly, they don’t explain the “how.” How do we fix the gap?

Static, singular, and descriptive.


Ok, now let’s assume you have your pay equity data in hand. What next?


3 Steps For Your Post-Pay Equity Audit


Step 1: Diagnose the “why”


Why is there a pay gap between, say, Black women and Latino men in middle management? Or between men and women in senior leadership? What factors might explain the gaps? Test your hypotheses and form conclusions.


You’ll need to look at the upstream decisions that impact pay, such as performance ratings and promotions.

  • Is there gender bias in performance evaluations? (This happens.)

  • Is women’s leadership potential inequitably assessed? (This also happens.)

  • Are men promoted at a greater rate than women? (Yep, this also happens.)


Warning: 94% of occupations have a gender pay gap. If your pay equity study indicates there are no pay gaps, you are the rare exception.


Step 2: Prescribe the “how”


How are you going to fix the gaps that your pay equity study revealed? My advice, set aside budget to close these gaps immediately. It’s not only legally prudent, it’s also a talent-retentionally prudent: 80% of women would leave their companies if they felt a different company offered greater gender equality.


Next, make a long-term plan. If you think of closing pay gaps as a point-in-time, retroactive project, you’ll be chasing a moving target.


Don’t play whack-a-mole after every pay equity audit your company conducts. Get ahead of the decisions that impact pay.

Salesforce knows this firsthand. They adjusted compensation for 8.5% of their global employee base after a recent pay equity audit. It cost them $5.6 million to address their pay disparities and they have spent more than $22 million to remedy pay gaps since 2015.


Don’t play whack-a-mole after every pay equity audit your company conducts. Get ahead of the decisions that impact pay. Go upstream and ensure performance evaluations are equitable. Ensure employees have equitable access to people and budget. Make sure you’re evaluating employee potential equitably.


Step 3: Communicate your decision


Transparency is on a continuum, with pros and cons on both sides. Decide how transparent you will be with the results of and decisions stemming from your pay equity study. If you publish an annual DEI report, consider adding this data to the report. Here’s how PwC does it (on page 29). Also important: include the statistical method used to access pay equity, since the term “gender pay gap” wears multiple hats.


Final Thoughts


Pay equity audits are a tool to help you close the gender equity gap. They are not the solution to achieving pay equity. It’s what comes after the audit that underlines your commitment to equity.


Curious about something? ​Ask your question here for a chance to have it answered in an upcoming edition of this newsletter.


© 2023 Katica Roy™, Inc.

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