Pay Equity is the concept of repaying employees who have a similar job responsibility with proportionate equal pay, notwithstanding their gender, caste, morals, or any other status.
To have a thriving corporate culture, a company must practice an equal pay system among its staff and ensure that each employee is paid equally. The HR department generally has to ensure that there is an equitable environment in the office surrounding.
In this article, we are about to learn about the process of “pay equity analysis,” its importance in the current time, and how it is conducted. The readers can also use this article as a guide to learn about the process of conducting pay equity analysis, its advantages, and many more.
What is Pay Equity Analysis?
Pay equity analysis is a form of auditing used in inspecting companies to get better know-how about their internal payment method. Both private and government companies are nowadays adopting this process of payment.
This method’s fundamental and most important purpose is to research the payment rates and ensure that the company’s employees get equal pay regardless of their gender, age, caste, job title, and more.
The equal pay method helps create a fair work environment and intensifies the corporate working process. And it also helps in enhancing the organization’s corporate customs and employee job satisfaction.
Benefits That Arise With The Outcomes Of The Pay Equity System
Pay Equity analysis can give an organization a wide range of benefits when used properly. Some of them are –
Non-discriminatory outcome
The most fundamental feature of pay equity analysis is that it ensures that the organization maintains a fair and equal payment method. To ensure every employee gets their payment on time and at perfect rates.
In case there are any discriminatory entries regarding salaries in the office between the employees, with the help of this method, the HR department may know about it. And the department heads can make new strategies to ensure all staff gets paid on an equal basis.
Upgraded company values
Payment has an essential effect on employees’ perspectives regarding their employers and how satisfied and pleased they feel with their work. It is very important for employees to feel satisfied regarding their work and feel happy and secure in their workspace.
One of the best ways to raise the employees’ satisfaction level is by promoting the pay equity method and giving salaries or pay as per their capabilities or based on their work.
Strengthening their competitive environment
Good payment and equal pay scale are crucial in attracting and preserving employees. The method of pay equity analysis compares the salaries granted to the employees and does an audit to find out if there are any discrepancies.
The method of pay audit analyses and compares the salary granted to an employee versus the compensation available for another employee with the same position and capabilities. This method also makes the process of recruiting easy for the departmental heads.
Decreased lawful danger
Equal pay to employees is mandatorily promoted by both the local governmental authorities and the federal governmental authorities. If the companies do not follow it, the consequences can lead them to lawful penalties and sometimes may even revoke their license.
And to avoid such risks, verify their internal and external compensation process and ensure that the payments are being made per regulations.
How To Execute The Method Of Equal Payment?
There are several different ways a company can conduct its pay audit, but there is a method comprising seven steps that well-known companies usually follow. The steps are as follows –
Planning strategies and preparing goals
Before beginning any new process or conducting an audit, it is very important to plan and make a strategy. The process usually starts by writing down the key points and discussing the main motto behind conducting the audit.
The common topics discussed here are the process to safeguard the company from legal actions, strengthening its competitive environment, discussing the pay intervals, increasing internal competition, and many more.
Fact-finding of payment practices
Once the process of analyzing begins, the auditors begin by going through the policies and guidelines that are followed inside the company. This process lets the auditors know the factors influencing an individual’s salary.
They analyze the reasons behind the department’s decision behind pay decisions, pay rates offered to new employees, and more.
Data gathering
Once the auditors review the inherent policies of a company, they start inspecting the individual payment system. The information collected during this process may vary as employees are paid per their roles and position in the company.
For example, an auditor may verify the salaries given to normal paid-up interns. And suddenly or by mistake, he gets hold of any manager post individual’s pay slip or somebody with a higher post than normal interns. It may create a misunderstanding which may create confusion in analyzing.
An auditor should verify salaries or details related to the employees’ pay slips and collect information about their company posts, intelligence, experience, hire dates, seniority in the office, and many more.
Comparing similar post payments
After having the basic information about the payment conditions, the auditors ascertain and compare which posts are equivalent to each other and should treat them equally. This step gives another chance to the auditors to verify if the basic guidelines are followed in the firm.
This step is sometimes complex as the auditors must set boundaries to compare two posts. Similar posts require either similar educational qualifications or skills or similar human efforts.
This step helps the auditors make different categories for which the employees are put into different groups, making the comparison process easier.
Data inspection
After collecting data and segregating the employees as per their analytical data pieces, the auditor compares the employees’ salaries in every category.
Here the comparison is made based on their gender, nationality, seniority, and other factors that might create a difference between the salary of two employees. If the auditor suspects any discrimination, they may re-analyze their category to ensure they are segregated properly.
Legal Perceptions
If the auditors suspect or find any discrimination between the payment method or payment rates, they may take help the legal way. They may decide on its legality with the given lawful rules and guidelines.
While laws may vary, it is necessary to ensure that the difference is because of seniority, skills, hours worked, etc., instead of gender, nationality, or any other. After verifying it with the help of laws, if the auditors find that the discrimination is justifiable, they may come to an end and finish the audit.
And in case it is illegal or unjustifiable, he may create a report and proceed toward the last step, which also includes rectifying errors.
Rectifying errors and taking action
If the auditors find illegal or unjustifiable discrimination regarding the payment of employees belonging to the same category, they can put forward their suggestions regarding the corrections that need to be made.
The first step related to this is changing the amount payable to the employees who are paid more or lesser. This process might sound simple and easy, but sometimes it can be very complex and difficult to manage. But then, some companies with HR professionals work hard and find a middle solution to every problem.
Internal And External Pay Equity Analysis: Differences Between
The process of conducting pay equity analysis is simple and easy but is hard to perform and requires a huge sense of knowledge regarding the laws related to it.
The process has two major points of discussion that are external pay equity analysis and internal pay equity analysis. The differences between these two are as follows –
- Internal Equity – refers to the employee’s perspective of being managed in the same way as that of another employee who belongs to the same class and category within the same organization.
In this process, the employees are compared to other employees of the same organization to determine if the management is paying unjustifiably lesser or higher salaries to any employee with the same features. - External Equity – refers to a situation where the employee’s perspective is the same as that of another employee who belongs to the same class and category but from another competitive organization.
Here in this process, the company (to which the employee belongs) is compared to that of other companies of the same category to verify and determine if the employees are paid equally compared to employees of other organizations or companies.
The Process Of Managing Pay Equity Analysis Between “Genders.”
As discussed earlier in the above article, paying equal payments to employees of the same category, same posts, same department, and many other aspects are very important and need to be followed strictly.
One of the major aspects of payment discrimination in the whole wide world is “Gender,” and that is why it is important to conduct Gender Pay Equity Analysis regularly.
The process of conducting such an analysis or program will help ensure that no organization is promoting or conducting gender discrimination.
Gender discrimination is illegal and is against the fundamental rights of an individual. And over this, gender discrimination regarding equal pay becomes void ab initio, i.e., it automatically has no legal form or effect from its initial stage.
While conducting this process, it is also necessary for the organizational heads or the auditor to also consider the other aspects that affect the difference in payments made to the employees. For example, their seniority, position, hire time, and many more.
Regression Review While Analyzing Pay Equity.
The pieces of information that are collected can be used or analyzed via the process of regression analysis.
It is a statistical tool that the auditor can use to analyze an organization’s method of paying its employees using the data collected by them or the data that might affect the pay system.
A regression analysis looks over all the matters that might affect an organization’s decision to pay its employees so that the organization can determine to what extent these factors, such as gender and other preserved aspects, affect its decision-making capabilities.
With the help of regression analysis, the auditors can know if the factors (that are affecting the payments) are negatively influencing the company’s decision-making process.
It helps analyze these factors and determine whether they are fair or unfair traits. Fair traits mean they are necessary and have a positive impact, for example, paying different salaries to employees in the same organization and the same department having similar workloads. Still, one employee is senior to another and has more experience.
Whereas unfair traits mean they are not necessary. They have a negative impact, for example, paying different salaries to employees from the same organization and the same department having similar workloads.
Still, one employee is fair and has charming looks, whereas another has a dark complexion and a not-so-charming personality.
Hence, regression analysis helps in comparing all the necessary variables (e.g., job position) and setting them side by side with the independent variable (e.g., complexion) and dependent variables (e.g., pay rates).
Conclusion
Pay Equity is the concept of repaying employees who have a similar job responsibility with proportionate equal pay, notwithstanding their gender, caste, morals, or any other status.
The equal pay method helps create a fair work environment and intensifies the corporate working process. And it also helps in enhancing their corporate customs and employee job satisfaction.
It has many benefits, including non-discriminatory outcomes, upgraded company values, a strengthened competitive environment, decreased lawful risks, and many more. Hence, pay equity analysis is a method that proves to be beneficial for both the employees and the employers, i.e., the organization.
It is so because it provides a sense of satisfaction to the employees, ensuring they are getting the same pay as the ongoing trend analysis. And for the employers or the organization, it helps maintain its position in the market. It keeps a happy work environment in the office where the employees work happily and efficiently.
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Business, marketing, and blogging – these three words describe me the best. I am the founder of Burban Branding and Media, and a self-taught marketer with 10 years of experience. My passion lies in helping startups enhance their business through marketing, HR, leadership, and finance. I am on a mission to assist businesses in achieving their goals.