Pay Equity Audit:

A Pay Equity Audit is increasingly gaining attention among organizations as a tool to assess pay through the lens of equity and fairness in the workplace. While a Pay Equity Audit may be a one-time event, the process of addressing the results and implementing changes is long-term, aiming for systemic change within the organization. This blog, authored by Susan Kreeger, ProspectHR’s founder and CEO, and Jennifer Loftus, Founding Partner and National Director of Astron Solutions, will explore how to best understand and implement the results of the audit.

Pay equity is influenced by many HR activities—hiring practices, establishing pay grades and ranges, managing performance reviews, rewarding certain roles more highly than others, and addressing turnover and retention. Implementing pay-related changes within an organization requires careful planning, deep involvement across teams, and clear communication.

When Should an Organization Communicate the Pay Equity Audit to Employees?

The timing of communication about a Pay Equity Audit can depend on whether there are underlying issues or complaints driving the audit. If the audit is being conducted without specific complaints, it might make sense to complete the audit first and then communicate the results. However, if there have been general concerns or complaints about pay fairness, it is beneficial for leadership to share the intent to perform a Pay Equity Audit to show employees that their concerns are being heard and addressed. Ultimately, company culture will play a significant role in deciding when and how to communicate this to staff—some organizations prefer a more transparent approach from the outset.

How to Present the Pay Equity Audit Results to Leadership

It is essential to have legal counsel involved in the process from the start to ensure open, honest conversations that are protected by attorney-client privilege. The audit results are typically presented to leadership, including the head of HR, the CEO, and legal counsel. In the audit report, the consultant will present the methodology, overall findings, red flags that need immediate attention, and recommendations for action, as well as supporting statistical information.

How Transparent Should an Organization Be About the Results of the Pay Equity Audit to Staff?

Transparency in reporting Pay Equity Audit results can depend on several factors—organization culture, legal advice, and the nature of the findings. If the results are highly individual, they typically remain confidential. However, if the results are organization-wide, companies can communicate the general results and action plans to employees, along with insights from their diversity, equity, and inclusion (DEI) initiatives. It’s important to balance transparency with legal guidance, especially when the results are negative. Admitting shortcomings while demonstrating a commitment to correcting inequities fosters trust within the organization.

Managing Remediation: What Happens if Pay Inequities are Found?

If a Pay Equity Audit reveals pay inequities, organizations must evaluate the scope of necessary changes. Are the issues widespread, or are they isolated? Organizations need to consider the financial impact of these changes and devise a plan for remediation. Some adjustments can be made immediately to correct serious inequities, while others may be addressed over time. For instance, salary adjustments might be implemented gradually over three to six months.

If budget constraints are an issue, organizations can explore options like freezing or slowing down higher-level pay increases, providing bonuses or variable pay, or making budget cuts in other areas to reallocate resources.

Social Media’s Role in Pay Equity Transparency

Social media has increased the visibility of salary information, particularly on platforms like Glassdoor. This can impact an organization’s decision-making about pay equity transparency. While companies cannot control everything shared on social media, they should monitor general sentiments and themes to identify any concerns. An organization’s approach to pay equity should be clearly communicated internally to prevent misunderstandings and external misinformation.

How Pay Equity Audits Support Diversity, Equity, and Inclusion (DEI) Initiatives

A Pay Equity Audit plays a key role in supporting DEI initiatives by ensuring that compensation practices are aligned with the principles of fairness. Addressing pay disparities demonstrates a commitment to equity, which is critical for employee morale and retention. Moreover, inequities identified in the audit often highlight broader issues related to hiring or retention practices that may need to be addressed to improve diversity within the organization.

Final Thoughts: The Importance of Pay Equity Audits for the Long-Term Health of an Organization

Pay Equity Audits help organizations identify disparities in compensation and take corrective actions, but these audits are only part of a longer journey toward a more equitable workplace. The findings can be surprising, but they provide valuable insights that allow organizations to make meaningful changes. A commitment to addressing pay inequities will enhance the organization’s reputation, improve employee engagement, and contribute to broader societal goals of equality.

Read Part I: What, Why, When, and How to Conduct a Pay Equity Audit