If you’re reading this, the chances are that you’re part of an inclusive organisation, taking your first steps towards understanding the complexities of Equal Pay. Or perhaps you’re slightly further along in your pay equity journey and you’re looking for expert knowledge to guide you along the way.
At Gapsquare, we provide innovative data-led solutions that support organisations like yours, enabling fair pay and inclusive progression practises so that companies can focus on performance, productivity and building inclusive teams. Put simply, we take the complexity out of pay equity. So if you’re feeling confused or lost on where to begin, there’s no need to worry – we break it all down below.
What is Equal Pay?
Equal Pay is the concept of equal pay for equal work. In the UK, this tends to focus on gender. The Equal Pay Act of 1970 states that an employer must provide Equal Pay for both men and women if the work they are carrying out falls under one or more of the the following conditions:
is same or broadly similar
has been rated as equivalent under a job evaluation scheme
is of equal value in terms of the effort, skills, knowledge and responsibility required
What is Equal Pay Analysis?
So, now that you know what Equal Pay is, you may be wondering what exactly an Equal Pay Analysis does and what its purpose is. An Equal Pay Analysis is a method of assessing pay practises within your organisation and ensuring that you are adhering to existing legislation in your country. Doing this type of in depth analysis allows you to identify any pay disparities and tackle them head-on.
Being able to check Equal Pay within your organisation will help ensure you are meeting regulations and paying employees fairly, thus avoiding a potential equal pay claim, which could be damaging to your business in terms of costs, reputation and employee relations and retention.
In terms of a more holistic approach, an Equal Pay Analysis is a great way to improve your overall working culture. Organisations that encourage pay transparency and equity will attract and retain the right talent, increase efficiency, productivity and overall workforce satisfaction, in turn sending a positive message about your organisation’s values to potential employees and customers.
Should I conduct an Equal Pay Analysis?
At this point you may be wondering whether an Equal Pay Analysis is something that is necessary for your organisation. At Gapsquare, we often say that you can’t fix a problem if you don’t know that it exists!
We’ve compiled a list of questions to help you decide whether a Equal Pay Analysis is right for you.
Are positions paid according to their assessed value, based on the level of skill, effort, responsibility and working conditions?
Are employees paid using established pay scales?
Are the benefits included in your compensation package, equally available to both male and female employees?
Is there a job description for every type of position?
Does your workplace have an established job evaluation system?
Do you monitor the number and proportion of women and men in each job class?
If you have previously completed a pay equity program, have you maintained it?
If you answered ‘No’ to any of the above or you aren’t sure of the answer, then we recommend conducting an Equal Pay Analysis in order to know where to improve.
What are the stages of an Equal Pay Analysis?
There are 4 stages when it comes to conducting an Equal Pay Analysis.
If you’d like to gain more knowledge around the subject, be sure to download our Equal Pay Audit resource.
- Plan your audit in phases: Start with looking at the pay between employees in the same role, job band or level. Next, we recommend examining any pay disparities that crop up within these. Finally, think of jobs within your organisation that involve the same amount of effort, skill or decision making.
- Define pay within your organisation: It’s important to decide what type of pay you are looking at. This could be FTE, annual pay and / or bonuses. We recommend that you take into the account the total compensation package such as pension contributions and gym memberships.
- Take stock of the data you have: Take stock of the current data you have such as tenure, spine points, performance grade and location. Evaluate this and decide whether it gives you enough context to build a clear picture of Equal Pay within your organisation.
- Decide what to include: Be sure to define the common population, compare different locations / countries, assess whether to look at historic data or a particular time frame and define common reward elements.
Remember to plan ahead and create a framework around what you are looking for. Ask yourself if you’ll be looking at mean or median data.
What are the costs of conducting an Equal Pay Analysis?
This will vary, depending on the method that you employ to conduct your analysis. To help you decide what option might be best for you, we will be exploring a few different possible options in this section.
Utilising internal expertise
At Gapsquare, we do the ‘number crunching’ for you-however, you may choose to do this in-house, where a member of your team will run regression analysis via Excel, Jupiter or Tableau. They would build a regression model and then with the help of a D&I expert, interpret and explain the results.
According to Glassdoor, to achieve the level and quality of what we offer here at Gapsquare an employee salary would look like this:
|Diversity And Inclusion Specialist||£30K-£50K|
|Marketing and PR||£32k-£50k|
Time-wise, this would take 1-3 months of the analysts’ time, whilst balancing their current duties. Cost-wise, this would account for a quarter of their salary.
Although other roles may spend less time on the project, you would still be looking at paying between one twelfth and one third of their salary, depending on how the process is structured.
Additionally, to make sure you’re aligned with current legislation you would also need legal advice, which can be over £1000 per hour.
This option is best for those on a budget, however the downside is that it puts undue pressure on employees to maintain their everyday duties in conjunction with an equal pay project.
To sum up, a company could be paying £150k per year on salaries, not including legal or data analytics advice. But, if this is carried out incorrectly we have calculated that it can cost up to $439,000-and there is always room for human error!
Hiring a consultancy firm
Consultancy is another option available to you when conducting an equal pay analysis. Consultants are likely to charge you a base fee for the project overall, although some do charge hourly rates. We don’t recommend going by hourly rates, as this allows costs to mount up and leaves you uncertain about how much you will be paying overall. Consultants would generally use the same process as explained in the previous section, so the main benefit of hiring their services is that they will be up to date with the current legislation.
An experienced D&I consultant will:
- Help define your goals
- Recommend solutions to help meet these goals
- Help assess impact
- Be up to date with D&I developments
In terms of costs for the project, you’d be looking at around $250 per hour or $2200 for a retainer based model. However for larger projects with no distinct timeframe, you may be able to negotiate price based on your needs.
Purchasing software (usually alongside consultancy)
A third option you might consider is a pay equity analysis software tool, like Fairpay® Equity Analytics, which is usually combined with consultancy. Prices for this usually vary, as the package is normally tailored to your needs.
The support package could include:
- Providing an executive summary pack covering raw pay gaps/equal pay cohort analysis/statistical analysis/pay remediation and recommendations
- Building a process for ongoing analysis to be self-managed
- Collecting and preparing your data for analysis
- Undertaking initial equal pay analysis
What should my Equal Pay Analysis budget be?
This is a commonly asked question and again, the answer varies depending on how much you wish to spend. Bear in mind that this isn’t just the cost of an Equal Pay Analysis, it also covers the implementation and upkeep of any D&I improvements you make to your organisation. However, it’s always good to have an idea of what the ‘norm’ is.
A recent study released by the Society of Human Resource Management reported that the diversity department budget at Fortune 1000 companies was $30,000 to $5.1 million, averaging at about around $1.5 million per year. When diversity was housed in Human Resources, the average annual diversity budget was $239,000.
What are the requirements for Gender Pay Gap Reporting?
If you are a UK employer with a headcount of over 250 employees, you will already have some understanding of Equal Pay, due to adhering to current UK legislation requiring you to report your Gender Pay Gap yearly on the ‘snapshot date’. Further guidance can be found on the government website.
Whether you do this in-house or choose to use an external provider, like Gapsquare, it is important to be aware of the key metrics required if you would like to take a deeper dive into Pay Equity within your organisation, as these will be used when looking at other factors.
You must calculate and report these Gender Pay Gap figures:
percentage of men and women in each hourly pay quartile
mean (average) gender pay gap using hourly pay
median gender pay gap using hourly pay
percentage of men and women receiving bonus pay
mean (average) gender pay gap using bonus pay
median gender pay gap using bonus pay
How does Fairpay® Equity Analytics Software work?
Our tool allows employers to become experts in pay gaps and champion Fair Pay. It’s a simple case of uploading your dataset into the system and receiving instant feedback on your pay gaps, along with detailed narratives to explain what is causing them. We can help solve both Pay Equity and Equal Pay issues, as well as pipeline inequalities caused by workplace structure.
We’ve given you a brief overview of how our tool works-now to get into the nitty gritty. Rest assured, there’s no problem if you’re not a ‘maths person’, we handle all the complex stuff so that you can drill down into your data and focus on what really matters-implementing sustainable change.
The main thing you need to understand when looking at pay analytics is the term Regression Analysis. Regression refers to finding a common trend throughout the data set. The data is displayed on an X-axis, which represents the Independent Variable and a Y-axis, which represents the Dependent Variable. The trend line can vary, depending on what the graph shows.
To put this in practise, let’s give an example. If we were looking at the link between Education (Independent Variable) and salary (Dependent Variable), we would be able to see a trend between the level of education an individual has and their level of pay. Based on the data points used, the regression line can predict how the Dependent Variable changes with the independent variable. In this example, it estimates an individual’s salary given a certain level of education. The gradient of the line predicts the change in salary given an extra year in education, whereas everything else remains equal.
This is where Fairpay® Equity Analytics Software goes one step further, helping you gain deeper insights into your data through Multivariate Regression. This allows you to look at multiple independent variables at the same time, which is extremely difficult to do via Excel. This then gives you a broader perspective of the factors affecting your pay gaps and an overall picture of pay equity within your organisation.
If you would like to find out more about how Fairpay® Equity Analytics Software can help you and your organisation, then please feel free to book a demo for a no-obligation 1-2-1 session with one of our lovely team.
We develop software that will revolutionise how you measure and end pay gaps in your company. Generate gender pay gap reports, ethnicity pay analysis, equal pay audits and beyond at the touch of a button.