Pay equity is an important topic right now.

If you’ve landed on this guide, odds are you need to start developing an action plan for the EU Pay Transparency Directive. 

Increased awareness around diversity, equity, and inclusion combined with the element of legislation ensures that organisations are taking active steps to an equitable and fair workplace.

But to right a wrong, you need to know what’s wrong? Are we right?!

Before embarking on your journey toward a 0% gender pay gap, it’s essential to start with a gender pay gap audit. Our starter guide covers 5 essential steps to execute a gender pay gap analysis. 

First things first…

Step 1: collect your employee data

How good is your HR data reporting process?

For this analysis, Human Resource teams will need to provide accurate and timely information on employees, such as age, gender, seniority level, current annual base pay, bonus pay, recent performance evaluation scores, and other employee data. 

For example, you might collect:

– Gender;

– Job title (or role, such as “individual contributor,” “manager”, etc.);

– Age or birth year;

– Company department;

– City or location (if your company has multiple workplaces);

– Full-time / part-time status;

– Annual base pay;

– Annual bonuses, commissions, stock awards or other compensation;

– Seniority level (such as “tier” within the company);

– Highest education (high school, college, grad school, etc.);

– Score on most recent performance evaluation (if applicable);

– Hire date; and

– Race or ethnicity

Step 2: make it anonymous

Employee Privacy

All sensitive information should be removed from your data file before analysing your gender pay gap. In some cases, this will require your Human Resource team to disguise the job title of employees in unique roles. For example, if there is only one VP of Marketing, replace this job title with a numerical code (such as “0142”) or group it together with other similar job titles to prevent any individual employee from being identified from your data. 

Step 3: organise your data

Organise job titles

Cluster into a smaller number of related groups. Having too many unique job titles with only a few team members in each will make your statistical work less reliable. For example, group together job titles like Financial Analyst I, Senior Financial Analyst, and Forecasting Financial Analyst into one “Financial Analyst” role. Your goal should be to have several men and women in each job role, so that you can study the pay gap within job titles.

Group your employees by location

If you’re an international company, examine gender pay gaps for countries separately. Each country has dramatically different labour regulations, institutions, and currency differences that make workers in different countries not comparable.

Equity / Stock options

Value stock grants at current market value: If you’re an employer that pays your workers partly in equity — such as restricted stock grants — you’ll need to make a decision about how to value that annual compensation. Value equity compensation at current fair market value, based on today’s prevailing share price. In your data file, add this compensation to your “bonus” compensation data.

Step 4: choose your A team

A gender pay audit will require someone to compile the data and do the statistical analysis. Be sure you’ve identified who this individual contributor will be before starting the process. We recommend this work be done by a member of your company’s analytics, data science, or finance team who has some experience with regression analysis and statistical software. 

Step 5: data regression and analysis

Any standard statistical software will work, including R, Python, Stata, SAS and more. This step will likely be done by the individual contributor you’ve identified in data science, finance or analytics. They’ll be the ones running your regression analysis. Glassdoor did a deep dive into their gender pay gap using R Studio which is a great starting point or resource for your data analyst/scientist. 

You have a pay gap, now what?

Decide whether to share your findings internally with employees. Being transparent about your efforts to pay workers fairly can help boost employee engagement, and contribute toward a healthy culture of fair pay and openness.

Next, you’ll have to decide whether the results of your gender pay audit suggest that changes may be necessary in your company’s pay and promotion systems. If your analysis identifies a large “adjusted” pay gap, or particularly large gender gaps within certain departments or job titles, your analysis can help target where to invest efforts to improve pay fairness in the future.

Finally, your team should decide whether or not to share the results of your internal gender pay audit with the world. Many employers have publicised the findings of their internal gender pay analyses.