Pay Equity Glossary
Trusaic is committed to helping employers achieve pay equity, every step of the way. We combine advanced data and statistical analyses with regulatory expertise to help companies strategize and reach their goals. We also provide education, resources, and the tools you need to navigate the complexities of pay equity. Below you’ll find an essential list of pay equity terms.
Legitimate Business Factors (LBF): Legitimate Business Factors (LBF) are factors affecting compensation, including a seniority system, a merit system, a system which measures earnings by quality or quantity or production, and/or otherwise reflecting differences in skill, effort, responsibility, productivity, training, and working conditions.
Identified Factors (IF): Identified Factors (IF) are Legitimate Business Factors (LBF) that are present in a client’s data for a pay equity analysis.
Employee Classes: Employee classes refer to employees divided into groups by protected classes, e.g., gender and/or race/ethnicity.
Reference Class: A reference class is an employee group defined by a specific protected class to which other classes are compared, and is used for evaluating wage differences.
Assessed Class: An assessed class is an employee class analyzed for a wage disparity relative to a reference class.
Similarly Situated Employee Group (SSEG): This refers to a collection of employees in which wages are expected to vary only due to Identified Factors (IF); two employees in the same SSEG with identical IF are expected to receive the same compensation.
Pay Analysis Group (PAG): A Pay Analysis Group (PAG) is a collection of Similarly Situated Employee Groups (SSEG) at different compensation levels; after adjusting for level compensation differences between two SSEGs, employees in those SSEGs with the same IF are expected to receive the same compensation.
Base Wage Rate: Base Wage Rate refers to employer-defined regular compensation expressed as an hourly rate, excluding paid overtime and bonuses.
Total Compensation: Total compensation reflects total monetary compensation (including paid overtime and bonuses) divided by total hours, adjusted for overtime hours for non-exempt employees.
Regression Analysis: This is an advanced form of statistical analysis in which weighted estimates are applied to different Identified Factors (IF) for determining wages; this type of analysis also measures pay disparities when applied to a Pay Analysis Group (PAG).
Pay Gap: A pay gap refers to an average compensation difference between an assessed class and the reference class without controlling for Identified Factor (IF) differences.
Pay Disparities: Pay disparities are average compensation differences between an assessed class and the reference class for which Identified Factor (IF) differences are controlled.
Cohort Analysis: This type of analysis compares average wages between assessed and reference class employees who match in terms of a particular Identified Factor (IF) or factors, e.g., sales workers who have overtime non-exempt status.
Wage Distribution: Wage distribution refers to effective hourly compensation ordered from low to high for a given protected class; it graphically compares low/middle/high wages within an assessed class with low/middle/high wages in the reference class.
Quantile Comparison: A quantile comparison compares the proportions of assessed and reference class wage distributions that are below a specific wage. For example, what proportion of the wages for an assessed class are below the median (50%) wage of the reference class? If the proportions of an assessed class below specified wage points are consistently larger than those for the reference class, that may be additional evidence of a pay disparity.
Economic Significance: A context-dependent percentage difference in compensation that is large enough to review, consider, or address is considered to be economically significant.
Statistical Significance: Statistical significance indicates the importance of a pay disparity as measured by the size of a test statistic.
Impacted Class: An impacted class is an assessed class with an economically significant pay disparity.
Exposure: Exposure refers to total annual compensation differences for employees in impacted classes.
Pay Equity Audit (PEA): A Pay Equity Audit (PEA) is an audit conducted to assess whether an employer’s workforce is equitably compensated regardless of gender, race, ethnicity, or other factors, accounting for Identified Factors (IF).
Pay Gap Risk Assessment (PGRA): A Pay Gap Risk Assessment (PGRA) is an assessment of compensation differences between an assessed class and the reference class without controlling for Identified Factor (IF) differences; it is often used by employers as a tool to determine the need for a Pay Equity Audit (PEA).