Salary Negotiations as a Part of Pay Equity Analysis
09 Oct, 2019
Pay inequity can be a pain point for many organizations. For starters, there is a lot of work that goes into properly conducting a pay equity analysis, and many employers face serious legal consequences when pay disparity is found in the organization.
In this post, you will learn how to conduct a pay equity analysis for your business, and the role salary negotiation plays in creating pay disparities. Read on to learn how a structured compensation system can help you avoid pay inequity as well as useful salary negotiation tips.
What is Pay Equity Analysis?
A pay equity analysis, put simply, compares pay for similar work. The first step is to take into account differences in pay for reasons such as:
- Role/job type
After taking these basic factors into consideration, with the “adjusted” information, a second analysis is conducted on whether a gap exists in pay between men and women and/or people of different ethnicities in an organization.
A pay equity analysis helps reveal trends across job types and helps identify outliers so that they can be corrected.
A pay equity analysis is not simply taking average pay across the board. It takes time and effort to make sure that as an employer, you’re making the right comparisons.
How to conduct a gender pay equity analysis
Pay equity analyses can be very complex. As an employer, you need to have an organized pay system set up complete with set ranges for different types of jobs and seniority levels. The first analysis will likely be the hardest, because there is so much initial groundwork involved. But once you are collecting the right data and have a solid system in place, you can conduct regular pay equity analyses more easily.
Here are important steps for getting your organization ready to conduct a pay equity analysis:
Determine your goals & purpose
You have to define what you want to investigate in each analysis clearly, otherwise, you won’t get the targeted answers you’re looking for. Try to answer questions such as:
- Is there pay equity among male and female new hires?
- Is there a systematic bias in how employees of different genders and backgrounds are paid?
- Is there pay equity among different ethnicities?
Determining the questions you want to be answered as well as the purpose and goals of conducting a pay equity analysis is a logical first step in the process.
Establishing clear goals and questions will also inform the methodology by which the analysis is conducted. For example, if the purpose of the pay equity analysis is to ensure compliance with laws, then you will need to set up the analysis in a way that extracts the information required by those laws.
Collect appropriate data
Once you’ve established parameters on how to move forward with your pay equity analysis, you have to collect the appropriate data relevant to the goals you’re trying to reach. Some examples of data points to collect include:
- Job title
- Seniority level
- Hire date
- Job location
- Hours worked
- Base wage/salary
- Overtime pay
- Bonus amount
- Level of education
- Years of experience
- Performance review scores
You may also need to make additional adjustments for things like currency and employees spread in different countries. For example, one employee may be making a higher salary in one country because of the cost of living being much higher and benefits not being offered by the government. These differences are important to take into consideration, so consider grouping employees by country or even city.
One of the biggest challenges employers often face in conducting a fair pay audit is that often, this data is not all in one place, or it was not captured by HR payroll databases.
*Note: If data is scattered throughout different systems or if it has not been collected at all, then that is the time that will be added to the overall project.
With Heartpace Pay, you can automate the data collection process and get insights about compensation within your organization much faster. Learn how to solve your payroll analysis easily here.
Analyze the data
Once your data has finally been collected and prepared, get intimate with it. Run a regression analysis, identify any outliers, make sure the currency is the same. Check for consistency in pay periods, etc.
The goals of this analysis are to determine whether gaps exist in equal pay between employees due to gender or race.
Once groups have been segmented for analyzation, remember that different groups might have different pay analyses. For example, when one group has more complex pay structures than another. You may need to run larger groups against more variables, while smaller groups may only need a basic statistical analysis.
A good way to weed out any unlawful disparities in compensation is by analyzing variables such as hours spent on the job, experience level, and performance review ratings.
Evaluate pay practices & policies
You’ve collected the necessary data, run several types of analyses, and now you have the final results. What do you do now?
This is where you can take the time to analyze pay, pinpoint disparities and, most importantly, why those disparities exist. Spend time examining both past and present pay practices to ensure the correct methodology is established. You should also understand the core components that make up compensation structures within the organization.
A pay equity analysis will look different for each individual organization. The results of the analysis will vary within departments, locations, and especially if the company has experienced extensive growth within a short period of time.
Take steps to correct pay disparities
When differences in pay cannot be justified by any lawful or reasonable means, your organization must take swift action to correct the disparity.
This means adjusting the compensation of a few employees. However, you should not reduce someone’s compensation to fix any disparity as this only causes more problems and can even be unlawful. In some countries, like in Sweden, there are stipulated time frames whereby you have had to make your adjustments.
Think of the timing of adjusting pay disparities and perhaps try to roll these corrections into regular annual pay adjustments. As an organization, it’s also imperative to communicate with hiring managers, HR, or other parties responsible for carrying out compensation about the issues identified in the pay equity audit.
Why is salary negotiation important?
Salary negotiation records can be a valuable point of data for pay equity audits. Information like the number of rounds of negotiation, and whether men negotiated more then women are important to keep track of. Surveys and studies have found that women often don’t negotiate the first offer at all. When negotiations happen less for women than for men, this contributes to the gender pay gap.
Salary negotiation tips:
Salary negotiations must start from a place of mutual respect, as the process can be a turning point in hiring a candidate. Here are important salary negotiation tips to ensure both parties get a fair deal while ensuring no disparities between men and women and whites and minorities occur:
1. Establish salary ranges
In any position, there should be a set salary range for that role. Try to research the typical industry rate for a given position from places like government labor statistics websites, or private sites like Glassdoor.com and Salary.com. Most candidates these days already use these resources for their own negotiating purposes.
2. Fully explain the role
It’s difficult for candidates to gauge what fair compensation would be for any role when they don’t have the full details. Let applicants ask plenty of questions so they know exactly what type of job they’re accepting and the responsibilities that go along with it.
3. Consider all the benefits you could offer
All is not lost if the candidate’s compensation expectations are beyond the set range agreed upon by the organization. Additional benefits such as flexible working hours, the ability to work from home, and extra vacation time are just a few of the extra benefits employers can offer to make the job more attractive to potential hires.
4. Be aware of pay differences
When researching, take the time to evaluate if this particular role is one where women tend to be paid less than male counterparts or if white employees tend to make more than other ethnic groups. When countering, keep these things in mind, and if the base salary cannot be negotiated, try other avenues such as bonuses, benefits, and future raises.
We hope these salary negotiation tips have been helpful and that you feel more informed on how to conduct a gender pay equity analysis. If you are ready to invest in a solution that will aid in ensuring fair pay across the organization, see what we can offer today.
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