The new U.S. presidential administration has moved swiftly in issuing executive orders that impact diversity, equity, and inclusion (DEI) initiatives. As organizations navigate these changes, many are questioning the implications for pay equity.
While federal DEI policies may be shifting, pay equity (also known to some employers as compensation audits) remains a critical priority for employers — both from a legal compliance standpoint and as a business imperative.
We want to provide clarity on these changes and reinforce why a neutral, data-driven approach to pay equity analysis is essential for ensuring compliance and mitigating risk.
Executive Orders and Their Limited Impact on Pay Equity
Executive orders can influence federal contractors and government agencies, but their impact on pay equity compliance for most private-sector employers is minimal. Here’s why:
- Pay equity is distinct from DEI initiatives. While DEI programs aim to improve representation and workplace culture, pay equity is rooted in legal requirements. U.S. employers must comply with longstanding laws such as the Equal Pay Act and Title VII of the Civil Rights Act, which prohibit pay discrimination based on gender, race, ethnicity, and other protected characteristics. These laws remain unchanged regardless of federal executive orders.
- State-level laws drive pay equity compliance. Over the past decade, more than 40 states have expanded their equal pay protections, with additional laws focused on pay transparency and pay data reporting. These state-level laws remain in effect and continue to shape employer obligations, regardless of changes in federal DEI policies.
- Federal executive orders do not override state legislation. Even if executive orders alter federal DEI initiatives, they do not preempt state-level pay equity laws. Employers must stay vigilant in meeting their obligations under:
- State pay transparency laws, which require disclosures of salary ranges in job postings.
- State pay data reporting requirements, mandating submission of pay data categorized by demographic group.
- State equal pay laws, many of which have broader requirements than federal statutes.
Why Pay Equity Remains a Business Imperative
Despite political shifts, pay equity should remain a top priority for organizations for legal, ethical, and operational reasons.
1. Compliance and Legal Risk Mitigation
The increase in state-level enforcement and private litigation means that employers must take a proactive stance on pay equity. Government agencies and plaintiffs’ attorneys continue to scrutinize pay practices, leading to costly settlements and reputational damage for organizations that fail to address inequities.
2. Merit and Compliance Go Hand in Hand
The administration’s focus on “merit” as a guiding principle reinforces the need for data-driven pay equity analyses. A well-executed pay equity analysis ensures that all employees are compensated based on legitimate Wage Influencing Factors (WIF) — such as skills, experience, and job responsibilities — rather than unconscious biases or systemic inequities.
3. The Business Case for Pay Equity
Companies that proactively address pay equity enjoy significant business benefits, including:
- Enhanced employee trust and retention. Transparent and unbiased pay practices reduce turnover and improve employee morale.
- Stronger employer brand. Today’s job seekers expect employers to prioritize unbiased pay practices, making pay equity a competitive differentiator.
- Reduced legal exposure. A robust pay equity strategy helps employers stay ahead of regulatory risks and costly litigation.
Best Practices for Pay Equity Compliance
To navigate the evolving pay equity landscape, organizations should adopt a neutral, systematic approach to pay equity analysis. Trusaic recommends the following key practices:
1. Use a Neutral-Based Pay Equity Analysis
Traditional pay equity studies often compare employee earnings against a predefined reference group—typically white males. However, this approach may fail to detect disparities affecting other demographic groups.
Instead, a neutral analysis method ensures that disparities are identified without assumptions about which group is disadvantaged. Our pay equity software solution PayParity® automatically determines the highest-paid demographic group within each pay analysis category, ensuring an objective and compliant evaluation.
By eliminating bias in the selection of reference groups, employers can accurately identify and address pay disparities across all protected classes — reducing risks of both systemic discrimination and potential reverse discrimination claims.
2. Ensure Hiring and Pay Decisions Are Free from Bias
Employers must take steps to remove bias from compensation decisions, particularly at the point of hire. Some common pitfalls to avoid include:
- Using gender or race as a factor in determining salary offers.
- Adjusting pay based on a candidate’s prior salary history (which is prohibited in many states).
- Failing to conduct pay equity reviews before setting salary bands.
To support compliant hiring practices, Trusaic’s Salary Range Finder® ensures that compensation decisions are based solely on job-related criteria — without incorporating gender, race, or other protected characteristics. This approach not only ensures compliance but also promotes competitive pay structures that align with industry benchmarks.
How Trusaic Can Help
While federal DEI policies may fluctuate with political changes, pay equity remains a legal, ethical, and business imperative. Employers must continue prioritizing pay equity efforts by:
- Conducting regular pay equity analyses using neutral-based methodologies.
- Ensuring compliance with state-level pay laws, which remain unaffected by federal executive orders.
- Eliminating bias in compensation decisions, particularly at the point of hire.
Trusaic’s PayParity® solution is designed to help organizations navigate these complexities with confidence — providing sophisticated analytics, unbiased insights, and legally compliant methodologies to ensure anti-discriminatory compensation practices.
Learn more about how we are guiding global enterprises to make clear, compliant pay equity decisions with ease.
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