Pay Equity Audits and State Procurement

Rep. Fentrice Driskell and Sen. Lori Berman have filed bills, H 633, S 652: State Procurement, that would reward state contractors who establish a process for determining that they pay men and women equally for equal work. The Department of Management Services would establish a certification program, and procurement would favor certified contractors.

You may wonder, as I did, how the criteria would be established for ensuring pay equity. The company payscale.com does some very interesting research and has some excellent suggestions as to how to conduct a pay audit.

In the recorded webinar I viewed, a researcher from payscale.com reported on his and other research showing that if you control for all the factors influencing salary, the pay difference between men and women is only about 2%. He stated that both the controlled and the uncontrolled pay gap are important. The control factors include such things as years of experience and job category. Biases are built into these, because women may take time out of the workforce and they are often funneled into job types that pay less. He showed research comparing men and women at early career, midcareer, and late career stages. At mid and especially late career, women are less likely to hold managerial and executive positions than men.

The presenters pointed out that pay equity laws are becoming more stringent in certain states and that this trend is likely to continue. Therefore, a company needs to protect itself against lawsuits by complying in advance with proper pay equity standards and by monitoring bias. One thing to look out for is that the job description for an individual should match what they are actually asked to do, especially when elements of that job description are compensable.

A large company can do advanced statistical analysis to study pay equity using multiple regression, but that takes specialized knowledge which is not usually available to a small company. Even if they hire an outside consultant with expertise, they may not have enough employees to yield satisfactory statistical results. However, the presenters suggested certain analyses that could be done using Excel (or a tool that they provide). First the company needs to collect data including job type, job level, demographics, full or part-time status, performance ratings if they exist, and of course pay. He stated that the gender breakdown across department/job group/job level may explain a lot of the uncontrolled pay gap, due to occupational segregation. That needs to be compared with appropriate outside reference groups.

To start the analysis, employees should be grouped by job family (such as accountants), job title, and similar departments might be grouped together. Once the groups are determined, the salary range can be calculated. The presenter suggested two statistics to describe where the individual falls in the salary range: the range penetration, which is simply how far up the individual salary falls within the salary range; and the compa-ratio, which is the salary divided by the range midpoint. (That midpoint would be the median rather than the average.) Then the analyst would compare the different demographic groups according to the statistics. The example shown was Accountant I, male versus female, showing that the range penetration of the males was 48% compared with 30% for the females. Excel could calculate a simple statistical test using this number, but the power of that test would be dependent on the number of employees involved. The presenter suggested that when looking at the data in a systematic way, the employer would probably be able to see where the problems are.

The presenter stated that if a lawsuit were involved, the fact that the company conducted a good-faith analysis would be persuasive. The methodology itself would be of secondary consideration at this point in time. Also, if employees know that the employer is looking carefully at pay equity, they might be less likely to sue. That good-faith effort was also described in the following suggestions that a company can use to ensure pay equity:

What else can you do to ensure pay equity?

  • Look at your promotion velocity.
    • Examine your processes and identify areas where bias can come in.
  • Have a clearly defined process for promotions.
  • Price a position, not a candidate
  • Encourage employees to discuss pay-related matters.
    • Talk to employees about how your pay decisions are made.
  • Audit your pay practices on a regular basis
  • Analyze your talent acquisition sourcing practices.
    • Identify areas where bias can come in.

Author: Pat DeWitt

I am a retired institutional researcher, a musician and musicologist, and support AAUW as well as several environmental causes.

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