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What to Consider Before Executing a Pay Equity Audits

Equal Pay Concept

What to Consider Before Executing a Pay Equity Audits

Posted by Payroll Data Processing in Blog Jan 15 2018

Gender bias and pay disparity have been getting a lot of public attention lately. Pay audits can help identify potential gender pay disparities, and determine whether any discrepancies are statistically significant. Before an employer conducts an audit, some things should be considered:

What is the Equal Pay Act

The Equal Pay Act requires that men and women in the same workplace be given equal pay for equal work. The jobs need not be identical, but they must be substantially equal. Job content (not job titles) determines whether jobs are substantially equal. All forms of pay are covered by this law, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.

Protect your information

It is important that the audit be conducted in a manner designed to protect it as privileged—which requires the employer to take certain, specific steps in advance of conducting the audit. Findings or evaluations should be prepared with the assistance of counsel, or at the direction of counsel. Counsel makes the audit information an attorney-client privilege and is protected under the work-product doctrine. This prevent the audit information from being discoverable in the event of an equal pay lawsuit. An employer should implement a privilege protocol to prevent discovery of information that may be protected by a privilege. Documents should be marked with clear headers and the group of employees who assist with the audit need to be limited to only key personnel.

Review yearly

Identifying potential disparities is only the first step. The employer conducting the audit then needs to determine whether the disparities are justified by legitimate factors unrelated to sex. A factor that constitutes a legitimate justification for a pay differential will depend on, among other things, the nature of the business and the positions at issue. An employer may be justified in paying more to a more experienced employee. The analysis of a wage audit may need to go beyond current pay to fully explore the reasons for a current pay disparity and determine whether it is supported by prior pay decisions. Once an employer has incorporated all relevant, legitimate factors into the analysis, unexplained pay disparities will not exist. If there are remaining disparities, the employer will need to determine how to address these. After the initial audit, employers should decide how frequently the will perform an audit to ensure that any potential gender-related disparities are identified and corrected. This allows employers to manage raises to ensure that men and women aren’t paid differently after their initial wage audit.

Equalizing pay

If there is an inequality in wages between men and women, employers may not reduce the wages of either sex to equalize their pay. People doing the same job, regardless of gender, deserve the same wage as a basic tenant of gender equality in the workplace. The jobs do not need to be identical, but they must be substantially equal. Job content (not job titles) determines whether jobs are substantially equal. All people doing the same job and contributing to the company should be compensated the same.

It’s concerning that women are still underpaid compared to men. Fortunately, more and more companies are saying enough and creating plans for eliminating their pay gaps. Pay audits can help employers to evaluate their own pay practices to prevent pay discrimination in their workplaces.