Having the right tools is essential for your compensation strategy. However, you also need to see where there may be potential bias, and monitor and analyze the right information to improve pay equity. Here's some insight into how that can be done.

Pay equity has been getting a lot of attention lately as employers contemplate how best to attract and retain talented employees. To learn more about how people analytics can improve pay equity, we talked to Wai Wah Pak and Annette Allen, both of whom are Directors of Strategy for ADP's DataCloud.

Q: Why is pay equity such a hot topic?

WWP: "Pay equity is a pressing issue that has been exacerbated by the pandemic. Millions of women dropped out of the workforce — then there's the "great resignation," with people leaving or changing jobs, which has put a spotlight on wages.

Another reason is there haven't been tools that would allow you to gather the information simply so that the initial analysis could easily be done. Several years ago, ADP started with Pay Equity Explorer. As we realized how useful and important this information was, we wanted to make it more customized, more targeted and focused. We wanted to help people not only find potential gaps but also know where to go next and compare options to close any gaps."

Q: What should employers be looking for in a tool to improve pay equity?

AA: "You want to identify the high-level issues with enough specificity to do a full pay equity analysis with your legal counsel. While most tools can compare pay based on jobs and locations, you want to be able to spend your time and focus on the places that matter from equity, risk and compliance perspectives. Since this can be sensitive, it's important to be able to control who has access to keep the analysis privileged and confidential.

You also want to see pay comparisons by factors besides gender. Inequities in pay can show bias based on race and ethnicity, or other protected classes."

WWP: "Pay equity analysis tools should be able to compare pay by job and geographic location since some places have a higher cost of living and people there will be paid more to account for that."

Q: How do pay equity analysis tools identify potential gaps?

WWP: "Generally, they start with the highest-paid employees and compare titles, location and time in job. Then you can look at jobs where there are significant pay differences by gender or race to see where there may be pay equity concerns."

AA: "This will give you a head start on the analysis and provide you with a foundation to assess where you are, where to look next and where you need to go as an organization."

Q: What other information do you need to understand and improve pay equity?

AA: "Once you have visibility into where the gaps are, you want information on different options and approaches. You want to know the cost to close any gaps and be able to see those costs, considering various options like job or location. When you can see all the available options, you can start to come up with guidance or recommendations.

The organization may have other pieces of the puzzle that you need to evaluate, such as education, skills or responsibility. Compare factors to understand whether the gaps are in places where people are being paid differently for the same general work. You want to be able to continue your analysis and then come back to the tool and compare and prioritize options. Having the right tools will shed light on pay structure and pay policy. Then you can take the lens broader to see how pay decisions affect everyone."

WWP: "Also, this is not a one-time exercise. Your workforce is dynamic. Pay equity is something you continuously review. It's essential information for your overall compensation strategy."

When your tools are easy to use and understand, and they give you actionable information, it's much easier to stay on top of pay equity issues. With these tools in hand, you can determine the best starting point and explore options before making any decisions.

Learn how to foster diversity, equity and inclusion in your organization, visit adp.com/dei

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