It is good for employers to do a statistical analysis of employee compensation periodically. It can help identify adverse compensation statistics specific to such demographics as race, gender, country of origin or other common threads. This analysis can help root out pay equity risks that could lead to future legal action against the company.

Analysts can use standard controls to put employees into appropriate groupings. These would include such relevant factors as:

• Job title
• Length of employment
• Time in position
• Location or market
• Performance ratings

These factors are grouped so the employer can look for statistically different outliers worth flagging. Once the employer flags the employees’ data, the analysts can then dig deeper to determine if the outliers are legitimate, an error or discriminatory.

What to look for

Those who do a deep dive into the flagged statistics should look for the following:

Data errors and misalignments: This could be a basic numeric error or missing information. It could also involve inaccurate or outdated job titles or misaligned pay grades. Analysts can weigh these details while considering job responsibilities.

Experience and education: These are legitimate and essential metrics, but some employers dismiss their importance because they may question the validity of the information because it is inconsistently entered using an unreliable process. Human resources departments may also not have this background information.

Mergers and acquisitions: Companies often integrate groups of employees this way, and the workers’ previous pay scale could be substantially different, leading to discrepancies. These differences can also explain the varying job titles, duties, compensation, or organizational structure.

Other factors can hold weight

Companies cannot just rely on statistics and data to validate pay. The deeper dive enables analysts to evaluate employee pay, whether legitimate factors justify it or whether it needs to be adjusted. In addition, it allows HR, managers and owners to identify, address or remove the issues that caused the inequity, which makes a lasting impact on their overall efforts to maintain pay equity among employees.