Salary.com produced a helpful webinar on the topic of conducting a Pay Equity Audit and broke down the essential steps.

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How to Conduct a Pay Equity Audit (salary.com)

Executive Summary of the webinar

I’m including the extra detail that provides added depth on why and how each step is carried out:

Key Takeaways from “How to Conduct a Pay Equity Audit”

1. Pay Equity as Both a Compliance Requirement and Culture Driver
   • Regulatory bodies (e.g., OFCCP, state pay-equity laws) demand that companies pay equally for equal or comparable work.
   • Pay equity also represents a critical cultural and reputational issue, reflecting how organizations value fairness and transparency in compensation.
2. Data Collection & Grouping Are Foundational
   • A robust pay equity audit requires comprehensive data: demographic (gender, ethnicity), job information (department, level, function), and compensation (base pay, bonuses, incentives).
   • Grouping jobs by comparable responsibilities, skills, and effort—rather than just department/title—ensures accurate side-by-side comparisons.
3. Internal Equity Analysis & Permissible Factors
   • Organizations use multivariate regression (when sample sizes allow) or simpler analysis (when data sets are small) to identify unexplained pay gaps that may correlate with demographics.
   • Gaps are not inherently illegal; they can be justified by legitimate, documented factors like performance, seniority, education, or geographic differentials.
4. Remediation and Budgeting
   • After identifying pay gaps, remediating them—whether through proportional, flat, or individualized adjustments—is essential.
   • Adjusting pay proactively addresses legal risk and also builds employee trust and engagement.
5. External Benchmarking for a 360° View
   • Comparing roles against the external market (via salary surveys or benchmarking tools) ensures that internal adjustments align with competitive pay practices.
6. Transparency & Ongoing Updates
   • Clear, ongoing communication about pay structures, ranges, and reasoning for pay decisions fosters trust and reduces confusion or perception of unfairness.
   • Pay equity audits are not “one and done”—periodic reviews help maintain equity over time, particularly as staff and market conditions change.
7. Leadership Commitment Drives Success
   • Full executive buy-in and integration of pay equity into HR and compensation strategies are key to sustaining these efforts.
   • This commitment supports broader organizational goals of employee retention, brand reputation, and compliance with evolving regulations.

Documenting Pay Gaps