Tread Carefully With Pay Equity Analysis

As an HR professional, you may be asked to do a pay equity analysis. Unlike most other analyses you will do, this area is fraught with risks. Consequently, you’ll need to take some unusual steps that would not be required in other analytics projects. Here are a few tips to help you stay out of trouble:

Involve Legal

How pay equity analysis needs to be done may be laid out in legislation. What identity groups you can and should focus on is likely laid out in legislation, too. Privacy rules are laid out in legislation. So ask your legal department for their help with any pay equity analysis. It’s best to get them involved at the start than get to the end and find out you’ve got a problem.

Get Management Support

Pay equity is a highly contentious topic, so you may get pushback on your analytical methods. For example, in your analysis, you will want to check if you can account for pay differentials by tenure. This means you will need some method to decide how much extra pay is justified by how many years of tenure. If people don’t like the answer, then they will attack your methods. But if you have got management to buy into your methods, then you will have the necessary support for your pay equity work.

Managers always think that analysis (including analysis of pay equity) is relatively straightforward and hence will not be contentious. But you know it gets complicated. You want to ensure that you’ve got support for the nuances of how you do the analysis in case others dispute your methods.

Focus on Facts, Not Insights

Normally, we tell analytics pros that they should provide insights. Pay equity analysis may be the exception. 

You should be careful about drawing conclusions from the data. For example, you can show the numbers comparing pay between two identity groups, but you probably don’t want to be the one declaring that pay is fair or unfair. Present the facts to leadership, and let them (or the legal department) draw conclusions about what those facts mean.

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Pay Attention to Pay Decisions Involving Managerial Discretion

The underlying cause of pay inequity can often be traced to situations where managerial discretion in pay is involved. For example, if the starting salary for a role is in part determined by managerial discretion, then new employees who are good at negotiating will get higher pay. This can disadvantage some groups (like women, who research shows don’t negotiate for higher pay as much). In fact, the U.K. Equality and Human Rights Commission discourages discretionary pay practices for this reason.

Therefore, when you do an analysis, keep a close eye on any areas where discretion is involved. There will need to be good explanations for decisions if the results lead to unequal pay.

The bottom line is that pay equity analysis isn’t as straightforward as it seems and is often contentious. You’ve got to approach the topic with a kind of caution not needed in some of your other work.

David Creelman is CEO of Creelman Research. Based mainly in Toronto and partly in Kuala Lumpur, he’s best known for his research on the latest issues in human resources.

He works with think tanks such as Talent Tech Labs (New York), Works Institute (Tokyo), Workforce Institute (Boston) and CRF (London). He’s collaborated with leading academics such as Henry Mintzberg (leadership development), Ed Lawler (“Built to Change”) and John Boudreau (future of work).

His books include The CMO of People: Manage employees like customers with an immersive predictable experience that drives productivity and performance with GrandRound’s CHRO Peter Navin; and Lead the Work: Navigating a world beyond employment with John Boudreau (USC) and Ravin Jesuthasan (Willis Towers Watson).

You can connect to Mr. Creelman on LinkedIn

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