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.
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.”
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:
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.
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.
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.
Ease of use & scalability
Offers comprehensive analyses
Quantify risks and pay discrimination liabilities
Find the root causes of pay disparities
Creating equitable, explainable, and competitive salary ranges
Developing remediation strategies
Mitigating legal risk
Expertise and guidance
Ease of implementation and customer experience
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:
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.
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.
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:
Can the vendor demonstrate this to the employer?
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.
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:
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:
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.
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.
of employees believe their pay is equitable, and less than one-third believe they are fairly compensated for their work.
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
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.
This rapid checklist can help you to assess and compare your pay equity software providers in three key areas.
Vendor offers:
Vendor software features:
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.
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.
Contact Trusaic today to see how PayParity can assist in more accurate and meaningful pay equity audits.
Choose pay equity software that helps your organization to:
“Their straightforward and transparent way of doing business gives us the assurance that our district is in good hands”
Sergio Cazorla“We Use PayParity as a retention tool because it will offer tangible, reliable evidence that Mother Jones pays its employees fairly”
Marla Jones Newman“We highly recommend their services”
Jed Snerson“Trusaic, hands-down, provided the best balance of both expertise and strategic point of view when it comes to pay equity”
Carissa Sweigart“They were professional, thorough, and detail oriented”
Michael Sanchez