Introduction to pay equity and PayAnalytics
Introduction
PayAnalytics was founded in 2017 to help businesses measure their pay gaps and take action to remediate or even close them. Our software was built by data scientists and engineers, and is delivered by pay equity consultants. Using our groundbreaking solution and cutting-edge technology, your team will become pay equity experts.
In our Essential guide to PayAnalytics, you will find the fundamental first steps to begin your pay equity journey. These steps focus on providing a hands-on introduction to PayAnalytics, covering features that are mandatory and necessary for running your first pay equity analysis. For more advanced instructions and other optional features, see the articles from the Taking pay equity further category.
What is pay equity and why is it critical?
Pay equity means paying people fairly for the work that they do. It goes beyond compliance and involves creating a culture of fairness. Working towards pay equity benefits your business in the following ways:
It helps you stay on top of increasing regulations,
It enables you to avoid pay disputes, claims and fines,
It improves employee branding and talent attraction,
It increases employee satisfaction and retention.
As part of your pay equity journey, here are a number of questions you’ll need to answer:
What are my pay gaps?
Who needs a raise to close the pay gaps?
How much will it cost?
How long will it take to close the pay gaps?
How can I ensure sustainable workplace equity?
Important concepts & terms
As part of your pay equity journey, it's important for your teams to understand some of the basic concepts. To access all of them, we have created a Glossary of Terms.
To start, you'll need to focus on pivotal concepts:
Unadjusted pay gap: also called the 'Broader pay gap', it is the difference in average pay between demographics, regardless of any other factors.
Adjusted pay gap: also called the "Equal pay gap", it is the difference in average pay after accounting for all key drivers of pay. It looks more specifically at demographics performing similar jobs, with similar qualifications, essentially beginning to measure equal pay for equal work. The adjusted pay gap is the output of the pay equity analysis (performed with a regression analysis).
Regression analysis: a mathematical method which estimates how each factor (also known as variable) in your data influences pay. If differences in pay can be associated with gender after accounting for all key pay drivers, that is an indication of an equal pay gap.
Compensation model: the outcome of the regression analysis. The model captures how each pay factor contributes to pay when predicting it. As a model, by definition, it is an estimation of pay and does not perfectly capture or explain its variability at an individual level.
Predictive pay: also called "fair salary", predictive pay is determined on an individual employee basis by accounting for numerous factors related to aspects of the job (such as the role or the responsibility) and factors related to the employees themselves (experience, tenure and even performance). Regression analysis allows us to account for all of these aspects together when calculating the equal pay gap. If actual pay equals predicted pay for all employee demographics, the equal pay gap would be zero.
Outlier percentage: difference, in percentage, between actual pay and predicted pay. An indication of the employee level pay gaps, it provides a valuable way to investigate extreme cases, and offers an early indication where raises may be needed. In areas of the organization where there is a greater level of variability in pay, there tends to be more managerial discretion in pay decisions.
Raise suggestions: a suggested increase in compensation for each individual employee. The number, selection and level of raises depend on your specific goals and can help you close your pay gap, or achieve a target pay gap percentage of choice. However, not every employee with a negative outlier percentage will obtain a suggested raise, as this also depends on your remediation budget.
How does PayAnalytics help you on your journey?
PayAnalytics supports you every step of the way and helps you make the right decisions. Take our pay equity maturity assessment, to understand where you are on your journey, and discover how you can progress to greater levels of maturity.
Our software helps you achieve the following:
Get your data in order to establish your unadjusted pay gap.
Understand how your compensation model explains pay gaps to measure your adjusted pay gap.
Reduce or close your pay gap, based on your goals and budget, through insightful recommendations.
Keep your pay gap in check throughout the year with real-time pay assistance for hires/promotions.
The PayAnalytics team will take you through a five-step process to achieve pay equity:
Prepare: start with the data you have.
Measure: analyze the composition of your workforce and your pay structures.
Close: eliminate disparities and ensure equitable access to opportunities.
Report: leverage built-in reports or create custom reports, and stay compliant.
Sustain: maintain equity, even as you change and grow.