Pay Equity Software
Buyer's Handbook
Pay Equity Software
Buyer's Handbook
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Every Employer Needs Pay Equity Software
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The Benefits of Pay Equity
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The Role of Pay Equity in Employee Satisfaction
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Who Is This Guide For?
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Evaluating Pay Equity Software
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Two Critical Questions
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Pay Equity Isn’t Optional
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Comparing Pay Equity Software
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5 Step Evaluation Checklist
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Conclusion: Pay Equity Is A Movement
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The PayParity difference
Every employer needs pay equity software
The gender pay gap in the US is at an impasse, hovering around 18% for almost two decades. Pay equity is the key to creating inclusive cultures, ensuring diversity, equity, and inclusion and a key element of the "S" in ESG, as investors are increasingly attracted to more ethical organizations.
Issues affecting pay equity transcend national borders. The introduction of the EU’s Pay Transparency Directive is a gamechanger and points towards a potential blueprint for future US and global pay equity legislation.
High performance organizations understand the critical importance of not only using pay equity software, but partnering with a trusted provider to ensure compliance with evolving legislation.
Download this handbook
The benefits of pay equity
A culture of pay equity is integral to successful organizations.
Research from Josh Bersin found that while 71% of business leaders see pay equity as a “critical component” of their talent and business strategies, only 5% are “truly excellent” at pay equity. The remainder see it as “a legal requirement, a sporadic compensation project or a way to enforce skills-related pay approaches.”
The role of pay equity in employee satisfaction
Pay equity also has a significant role to play in employee satisfaction and retention. Gartner’s research also notes that US employees are growing more sensitive to pay disparities. Negative perceptions of pay equity can result in:
15%
fall in intent
to stay
13%
rise in job
search activity
13%
fall in employee
engagement
Fair compensation practices matter to your workforce.
More than ever, employers must be able to set equitable, explainable and competitive salary ranges in order to attract and retain talent, and achieve their objectives.
Who is this guide for?
This guide is for CEOs, CHROs, Total Rewards/Compensation professionals, people analytics professionals, pay equity software buyers, HR, People Analytics, DEI, Legal (internal or third-party), and IT.
Above all, it is designed for organizations committed to shaping inclusive cultures and achieving workplace equity who wish to partner with a pay equity software provider they can trust.
Section 1: Evaluating pay equity software
Your chosen pay equity provider should meet the following key criteria:
Demonstrates best-in-class methodology: High performance pay equity software provides a comprehensive analysis, eliminates systemic bias, and demonstrates compliance with complex and evolving legislation.
Identify the root causes of pay inequity: State-of-the-art pay equity solutions identify risk areas for remediation and pay gaps within every employee group, and at every level in your organization. Choose a solution that remedies the root causes of pay disparities using advanced analytics and algorithms that pinpoint problematic factors, including biases and faulty systemic processes.
Offers multidimensional analysis: Intersectionality is key to achieving pay equity because it recognizes that individuals can experience discrimination and inequality based on the intersection of multiple identities, such as race, gender, disabilities, and age. The only way to determine whether your pay practices are truly equitable is to consider intersectionality.
Stays ahead of global pay data reporting requirements: The complex nature of pay data reporting requires technology that enables you to navigate differing jurisdictions, state, and national laws to ensure compliance. Choose software that delivers analyses by employee groups at every level and global analyses by country.
Proven pay equity expertise: The increasing complexity and changing nature of pay data reporting requires ongoing access to expertise and guidance in areas including compliance and pay analysis. Delivers results in real-time: With continuous pay equity monitoring, your organization can have a steady, up-to-date pulse on your pay equity status. Any time there is a change in your workforce, you can be confident that your audit analytics are accurate and reflect your current status.
Offers an enterprise-grade solution: Regardless of your organization size, your pay equity technology must be enterprise-grade and capable of integrating with the largest human capital management solutions, such as Workday, SAP, UKG, and ADP.
Purpose built for pay equity: Your vendor must offer analytics that give you clear visibility and insight into your employee pay data and enable you to comply with confidence in understanding and navigating evolving data reporting requirements.
Ensure compliance with EEOC Title VII: The EEOC made it clear that employers cannot delegate responsibility for discrimination to a third party software provider, nor rely on their vendor’s assurance that its software complies with EEOC Title VII. If your pay equity software violates workplace laws, you, as an employer, may be held liable.
Know the questions to ask
Ease of use & scalability
- How easy is it to upload and configure data?
- Can the solution rapidly analyze large data sets?
- How quickly can it run a pay equity analysis?
- Does the software support your specific use cases, including remote, global, and working across multiple jurisdictions?
Offers comprehensive analyses
- Does the solution use groups of employees performing similar work to make comparisons?
- Can it identify statistically significant pay differences within those groupings?
- Is a regression analysis carried out on each pay group to determine whether gender and/or race pay gaps exist for reasons beyond legitimate business factors?
- Are recommendations for compensation decisions made in real-time? (i.e., new hire salaries, pay raises for promotions, and lateral moves)?
- Can you analyze the impact of potential compensation changes before they are made?
Quantify risks and pay discrimination liabilities
- Does the solution use intersectionality to identify potential pay disparities? (See also Section 2)
- Can the vendor explain how the root causes of pay disparities are identified?
- Does it reveal the implications for overall annual compensation at every level, from the individual employee level to the workforce level?
- Does it assess the accuracy of pay disparities through multiple dimensions, for instance, through cohort comparisons that measure average gender pay gaps among employees in the same job level and department?
- Do the comparisons help employers to understand and analyze how robust the regression- based pay disparity findings are?
Find the root causes of pay disparities
- What methodology does the vendor use to identify the root cause of pay disparities?
- Can the vendor demonstrate the commonalities that exist among groups most affected by the pay disparity?
- Is it clear how disparities vary across time, location, and organizational level?
- Does the solution allow you to identify groups of employees that may not have equal access to jobs or promotions, and cannot progress to higher roles (i.e., women, people of color, LGBTQIA+ community?)
- Can the vendor help you to address median pay gaps by improving pay equity and opportunity equity?
Creating equitable, explainable, and competitive salary ranges
- Does the solution enable you to comply with pay transparency legislation?
- Can the vendor show how it determines competitive and fair salary ranges?
Developing remediation strategies
- Does the audit permit different strategies for addressing risks that balance both cost and effectiveness?
Mitigating legal risk
- Does the vendor ensure that attorney-client privilege is preserved?
- Does the solution extend to pay data reporting across other US states and internationally, for example, the UK and the EU?
- Does the vendor understand the reporting requirements of the EU Pay Transparency Directive?
- Has the solution been vetted by legal experts?
- Is the solution GDPR compliant?
- Does the solution comply with pay equity legislation, including EEOC reporting?
- Does the software comply with EEOC Title VII (see also Section 2)?
Expertise and guidance
- Does the team supporting you have experience in carrying out complex pay equity analysis?
- Is advice offered around grouping employees and developing remediation plans?
- Are structured and clear pricing models provided so you understand the exact cost of support and consulting?
- Will the vendor’s services help you to communicate pay equity audit results to employees, stakeholders, and investors?
- Does the vendor demonstrate clear thought leadership and demonstrate a clear understanding and focus on workplace equity?
- How does the vendor demonstrate commitment to responsible AI?
- Does their website/resources section demonstrate evidence of thought leadership and staying ahead of the curve on pay equity trends?
Ease of implementation and customer experience
- Are you provided with a clear implementation plan?
- How comprehensive are the support, resources, and necessary training?
- How easy is it to provide feedback in the case of concerns over the product’s ability to comply with legislation?
Section 2: Two critical questions
While considering the most appropriate software solution for your business, we strongly recommend that your pay equity software provider can respond positively to these two critical questions:
Intersectionality
#1 Does the solution offer intersectionality in pay equity audits?
The EEOC states "pay inequity is not solely an issue of sex discrimination, but an intersectional issue that cuts across race, color, national origin, and other protected classes."
Intersectionality is important because it provides a framework within which to better understand the complex ways society treats different groups and individuals and the impacts of that treatment.
Conducting a pay equity audit without accounting for multiple dimensions, such as gender, race/ethnicity, and age, can lead to an incomplete and potentially harmful analysis. This is because an analysis that only considers one dimension, such as gender, may reveal pay disparities, but it will not reveal the full extent of the problem. Additionally, it may not address the specific experiences and challenges that individuals who belong to multiple marginalized groups face, leading to ineffective solutions and flawed methodology.
Intersectionality is key to achieving pay equity because it recognizes that individuals can experience discrimination and inequality based on the intersection of multiple identities, such as race, gender, disabilities, and age.
EEOC Title VII
#2 Does the pay equity software comply with EEOC Title VII?
Understanding the implications of EEOC Title VII guidance
EEOC Title VII Guidance issued in May 2023 is only the beginning of a move towards eliminating AI bias in automated solutions and promoting the use of responsible AI used in all HR processes.
EEOC Title VII guidance applies to all employment decisions, including decisions on compensation, and affects employers using AI tools, such as pay equity software.
Title VII guidance makes it clear that employers cannot delegate responsibility for AI bias to their software vendor, nor rely on their vendor’s assurance that its software is Title VII compliant.
If your pay equity software violates workplace laws,
you, as an employer, may be held liable.
EEOC guidance states that "in many cases," an employer is responsible under Title VII for its use of algorithmic decision-making tools even if the tools are designed or administered by a software vendor, "if the employer has given them authority to act on the employer’s behalf."
EEOC Title VII: Critical questions for your pay equity software provider
To ensure Title VII compliance, your pay equity software vendor must respond to the following questions:
- What steps have been taken to ensure their software does not cause an "adverse” or "disparate impact?"
- Has the vendor relied on the four-fifths rule?
- Has the vendor carried out an evaluation of employment-related AI tools to ensure compliance with workplace laws, for example, an audit of all AI functions to identify and remove any potential bias?...
Can the vendor demonstrate this to the employer?
- Does the vendor’s software allow you to evaluate the impact of pay equity if you hire one sex/ gender over another?... If so, this potentially places your organization at risk of discrimination, which would violate Title VII guidance.
Title VII compliance also requires employers to carry out ongoing reviews to determine whether AEDTs may result in workplace discrimination. This includes reverse discrimination too.
Reverse discrimination can arise when legislation intended to address discrimination against minorities and marginalized groups, such as women and LGBTQIA+ people, discriminates against majority groups. Please refer to our Glossary for examples of reverse discrimination.
Ensuring responsible AI
The rapid rise of AI, while creating significant opportunities, has more recently raised ethical concerns, due to its ability to embed bias, leading to workplace discrimination. An IBM study found that nearly three quarters of employers are failing to reduce unintentional bias, while 60% were not developing ethical AI policies.
Issues arise because AI and automated systems are only as good as the data fed into their algorithms and will embed unconscious human biases within that data as normative.
Partner with a pay equity software provider you can trust.
Section 3: Pay equity isn’t optional
Addressing objections to pay equity software
In today’s environment of legislation and global shifts around the pay gap, achieving pay equity is not optional. Here, we address three of the most common objections to investment in pay equity software:
#1: Lack of budget
As global pay equity laws become more complex, investment in a robust pay transparency policy will be key to both compliance and your organization’s ability to attract and retain talent and achieve financial goals.
Globally, we are on the cusp of a new era of pay equity, epitomized by the EU Pay Transparency Directive. The EU Pay Transparency Act also puts the onus of the burden of proof on the employer. A Joint Pay Assessment is triggered whenever the pay gap exceeds 5%
Pay equity software helps you to:
- Comply with EEOC reporting, including Title VII
- Navigate complex legislation
- Prepare for, and comply with, EU Pay Transparency Directive
By failing to invest in pay equity software that addresses your organizational needs, enables you to comply with pay transparency laws, and demonstrates compliance with EEOC Title VII, your organization is at risk of potential equal pay claims or lawsuits.
If your current system is outdated, does not offer intersectionality or address root causes of pay disparities, or leads to repeated issues in your compensation structures, you are at risk of non-compliance. Investment in pay equity attracts more investment, increases staff retention and employee engagement, and contributes towards achieving financial goals.
The cost of investing in pay equity reduces the significant risk of sanctions and fines for non-compliance.
#2: Pay equity isn’t a priority
Pay equity must be a priority for every employer. Evolving and expanding pay transparency legislation, and a trend towards responsible AI is placing the onus on employers to ensure compliance and prevent pay discrimination.
Globally, we are on the cusp of a new era of pay equity, epitomized by the EU Pay Transparency Directive. The EU Pay Transparency Act also puts the onus of the burden of proof on the employer. A Joint Pay Assessment is triggered whenever the pay gap exceeds 5%.
There’s more to adopting a culture of pay equity than ensuring compliance with pay transparency laws. It provides a springboard for best-in-class, forward-thinking organizations to create a more open, inclusive, and positive workplace, and in doing so, rebuild connections and employee trust.
Further, organizations do not have pay equity unless their employees believe they do.
Creating a culture of pay equity supported by a proven and robust pay equity solution is not only a matter of compliance. It is the right thing to do.
For more on the benefits of pay equity, see Pay Equity Is A Priority For Employers In 2023: Here’s Why
#3: Insufficient or unclean data
Inaccurate or insufficient data puts your organization at risk of pay disparities and pay discrimination claims. A pay equity audit presents you with the opportunity to analyze and cleanse your data, while identifying the gaps and disparities in your compensation structure. It also makes a clear statement to your employees that you are committed to creating workplace equality.
Partner with pay equity experts who can help you to extract relevant data, across pay levels, locations, countries, job roles, employee groupings and so on, to carry out accurate analyses and put the structure in place for equitable pay.
Invest in a purpose-built pay equity solution that identifies the root causes of pay disparities, is backed by legal expertise, complies with EEOC Title VII, and enables you to avoid bias.
Section 4: Comparing pay equity software
Vendor checklist
This rapid checklist can help you to assess and compare your pay equity software providers in three key areas.
Resolving pay disparities
Vendor offers:
- Gender, race/ethnicity comparison (intersectionality)
- On-time, on demand pay equity analytics
- Unlimited pay analyses
- Continuous pay gap monitoring
- Risk identification
- Disparity progress tracking and trending
- Custom remediation strategies
- Cost and planning simulations
- Pay policy model effects
- Systemic root cause identification
- Employee risk clusters
Prevent pay inequity
Vendor software features:
- Comply with state pay transparency laws
- Salary guidance for recruiters and managers
- Salary range recommendations that incorporate external labor market data with internal pay equity analytics
- Determine total compensation in real-time
- Prevent wage compression
- Overlay internal pre-approved pay ranges
- The most current and accurate labor market data
- Fair pay recommendations that prevent pay inequity
- Ensure Workforce Diversity and Equity
- Hiring, promotion, retention, and opportunity analytics
- Measure diversity
- Analyze pay quartiles
- Benchmark comparison
- Expert consulting
- Employee sentiment survey setup, administration, and management
- Survey employee belonging, inclusion, and access
Additional support
- Comprehensive pay gap analysis
- Pay gap significance test
- Wage distribution analysis
- Equal pay risk assessment
- Expert results interpretation
- Expert guidance for including remarks in your submission
- Expert remediation strategy recommendations
- Comply and file timely reporting for all aspects of pay equity legislation, including EEOC Component 1
- Comply with EOC Title VII
- GDPR compliant
5 Step evaluation checklist
Step 1: Gain buy in from stakeholders
- Prepare a case for pay equity, identifying potential objections
- Identify key stakeholders in the evaluation process
- Clarify the approval process and who has authority in making the final decision
Step 2: Determine priorities and deadlines
- What goals do you wish to achieve by investing in pay equity software?
- What challenges are you facing that pay equity can help you resolve?
- What are the essential features you require from pay equity software? (use our summary checklist to highlight your must-haves versus nice-to-haves)
- When are your pay data reporting dates?
- What is your deadline for implementing your pay equity software?
- Prepare questions for your software vendor by using our key criteria, additional questions, and summary checklist
Step 3: Research pay equity software providers
- Carry out online research to create a shortlist
- Which of your goals and criteria does each provider meet?
- Review customer details and their online resources (ie blog/guides)
- Are they recognized for innovation or leadership?
- Does their website demonstrate authenticity and thought leadership?
Step 4: Contact vendors to schedule a meeting
- Speak to a pay equity expert or schedule a demonstration
- Are your questions answered comprehensively?
- Review their answers to our summary checklist
Step 5: EEOC Title VII compliance
- What steps have been taken to ensure the software does not cause an ‘’adverse’’ or ‘’disparate impact?’’
- Has the vendor relied on the four-fifths rule?
- Can the vendor clearly demonstrate it has carried out an evaluation of employment-related AI tools to ensure compliance with workplace laws, i.e, an audit of AI functions to identify and eliminate any potential bias?
- Can the vendor demonstrate its commitment to responsible AI?
Conclusion: Pay equity is a movement
Best-in-class employers understand that a commitment to pay equity is only the beginning. Pay equity isn’t just a matter of compliance, it is a reflection of your organization’s mission and culture.
High performance organizations embrace pay equity as part of a broader reflection of their intention and mission to create an inclusive culture, which reaps its own rewards.
Start by investing in pay equity software
A pay equity audit reveals much more than a gender pay gap. It makes a statement about your compensation philosophy and your commitment to workplace equality that goes beyond its legal obligations on diversity, equity, and inclusion.
As the stakes get higher, ensuring compliance with pay transparency legislation, evolving global requirements and consolidating employee and investor trust requires a proven workplace equity solution that you can trust.
The PayParity difference
Intersectionality is one of the key differentiators for Trusaic’s PayParity pay equity audit software. PayParity can analyze compensation through the intersection of gender, race/ethnicity, disability, age and more in a single statistical regression analysis. At once, employers can understand compensation differences across their workforces, accounting for multiple demographic details. Other companies often analyze these demographics one at a time – that is – not together and through binary analysis. The danger in analyzing compensation this way, is that it does not deliver a complete picture.
The only way to determine whether your pay practices are truly equitable is to consider intersectionality.
- Trusaic Payparity finds and remedies the root causes of pay disparities using advanced analytics and algorithms that pinpoint problematic factors, including biases and faulty systemic processes.
- A pay equity software solution like Salary Range Finder® can help to determine competitive and fair salary ranges by overlaying internal pay equity audit data with that of external labor market data provided by LightcastTM. Fair salary ranges are instantly determined for your job listings by combining the two data points. The Salary Range Finder helps HR and compensation professionals identify equitable salary ranges for job listings.
- By using both internal pay equity audit data and external labor market data, the Salary Range Finder can generate an internally and externally equitable salary range for all jobs. Organizations are encouraged to use the Salary Range Finder before sharing salary ranges in job postings, as it can help employers ensure equitable pay ranges and prevent pay inequity across its workforce and not just for new hires.
- In addition, we offer full compliance with EEOC Title VII. Our clients can be confident that they are not violating workplace legislation or promoting bias or discrimination in compensation structures.
Contact Trusaic today to see how PayParity can assist in more accurate and meaningful pay equity audits.
More than a pay equity solution
Choose pay equity software that helps your organization to:
- Identify the root causes of pay disparities in your organization, using intersectionality
- Ensure compliance with pay equity legislation in the US, the EU and globally
- Understand the implications of EEOC Title VII in relation to employer liability and your pay equity software provider
- Commit to pay equity in your compensation structures
- Create equitable, explainable, and competitive salary ranges to comply with pay transparency laws
- Create inclusive cultures and workplaces of equality and diversity with opportunities for everyone to thrive
- Embrace the social aspect of sustainable investment (ESG) to enhance financial performance and brand reputation
- Commit to the principles of responsible AI
