Today, issues of gender discrimination and wage inequality are being brought to light and scrutinized more closely than seemingly ever before. While the U.S. trails countries that have been more aggressive in legislating workplace equity, like the U.K., this is rapidly changing. New laws, regulations, and requirements are transforming the American business landscape for the better, but sometimes at a rate that individual companies struggle to keep up with.
In such an environment, the pay equity audit is an increasingly valuable tool. While surprise audits are sometimes conducted by the U.S. Department of Labor, businesses of all kinds have found that conducting their own internal audits allows them to get a jump-start on correcting wage and hiring imbalances before they result in expensive litigation.
What is a pay equity audit?
A pay equity audit is an analytical study of an individual company’s entire pay structure. It looks at years’ worth of payroll data to determine how much employees are being paid, statistics regarding how various demographics are compensated in comparison with one another, and what factors most commonly determine employee pay rates.
In doing so, an audit can highlight potential discriminatory practices and problematic oversights. Not all wage disparities are caused by discrimination. Many have legitimate justifications, such as differences in employee experience, efficacy, or responsibility. By not just calculating pay rates but also investigating the reasoning behind them, a pay equity audit makes it easier to identify valid concerns as well as zero in on their causes and effects.
What can an audit reveal?
While the primary purpose of a pay equity audit is to determine the presence and severity of wage inequality within a company, that’s not the only thing its results can reveal. For instance, a company might find that its hiring practices are inadequate for assembling a diverse workforce and that a greater emphasis needs to be placed on recruiting new employees of different genders or races.
Another company might find that its hiring practices achieve diversity, but that members of one demographic are inordinately denied opportunities for advancement. Sometimes individual teams or departments have statistics that don’t match up the rest of the company, indicating possible problem employees. By examining the entirety of a business’ demographic and payroll information, a wide array of pressing issues can be uncovered and subsequently addressed.