Preparing for a Pay Equity Audit

The best way to learn how your organization is faring on the pay equity front is to conduct a pay equity analysis, which provides insight into policies and identifies areas where revision is needed. But the process does require readiness. Here’s what you need to know about preparing for a pay equity audit.

The Issue

There’s an ongoing and resurgent push for pay parity in the workplace, particularly as it relates to gender. The fact is that, despite the passage of major legislation, unfair systemic policies impede women from attaining their fullest potential. In fact, some experts believe that white women won’t likely see parity until 2059; Black women, 2130. Hispanic women won’t likely be on par with white men until 2224.

Still, there’s something organizations can do now to assess and, if necessary, right the situation in their own houses. But the pay equity audit process requires planning across multiple departments, and perhaps help from external experts or legal counsel. Here’s what you need to do before beginning a pay equity audit.

  • Review current federal and state laws. Before digging into the compensation situation at your company, get up to speed on any legal requirements. In the United States, you’ve got Title VII of the Civil Rights Act of 1964, which, for one thing, prohibits discrimination based on gender. Then there’s the Equal Pay Act, which bars gender-based discrimination in compensating for equal work, and the Lilly Ledbetter Fair Pay Act, which requires equal pay for equal work and includes all forms of compensation in the term “wages.”

Some individual states have been introducing and passing their own measures to complement the federal laws. You may need help from a state-level policy expert or human resources consulting firm to apprise yourself of them.

  • Be ready to address any disparities. If you launch an audit, you need to be prepared for unfavorable discoveries. You should be ready to fix any existing inequities as well as to communicate what happened – and what your remediation plans are – to the company, community stakeholders, shareholders, and perhaps to journalists. Just make sure you don’t improperly disclose any pay info or data.
  • Get your team together. Prior to starting the audit, be certain that your team is aware of the exercise’s goals, parameters, scope, and depth of info to be shared with auditors. You’ll also need to pull together a committee to lead the audit.
  • Determine transparency levels. Decide how much transparency you’ll provide various organization players. Be mindful that some audit aspects are due client-privilege and may not be shared with others.
  • Get your messaging together. Yes, you need a communication strategy, which you should coordinate with your executive and legal teams, human resources, and, if retained, your third-party counsel.
  • Get buy-in from leadership. Your leadership team must be on board with the audit. Otherwise, it’ll be hard to make any enduring organizational change. Also, any changes or audit decisions arising from the audit must be guided by the exec team.
  • Work with HR and legal. These teams will be at the fore as the audit unfolds. You must work with them to establish procedures for how and when any changes need to be made and how “pay” discussions will occur.
  • Shareholders and stakeholders. If you’re a publicly traded concern, you’ll have certain standards that you must uphold as the audit plays out. However, you will have flexibility in terms of establishing internal and external communication. You need to drive your own narrative.

As you can see, preparing for a pay equity audit does take some doing. However, once you work through the steps, you’ll be set to conduct one of the most important exercises you can do for your company – and your employees.