Project Checklist for Conducting Internal

Pay Equity Analysis

By: Michele Whitehead, SPHR

GET BUY-IN FROM KEY DECISION MAKERS

Executive Management
Line Managers
Legal Counsel
HR
Finance

OBTAIN ATTORNEY CLIENT PRIVILEGE

Determine if pay equity analyses will be conducted in-house or by outside
consultant
Determine who will send/receive data and reports to maintain privilege
Have in-house or outside counsel send a letter requesting the pay analysis to you
or the outside consultant who will be conducting the analysis

DEFINE A PRELIMINARY BUDGET FOR EQUITY ADJUSTMENTS

Calculate estimated cost of adjustments (round up)
Calculate long term budget impact
Consider potential savings (red-circle salary freezes)
Consider cost of NOT conducting pay analysis (reputation, ability to attract/retain
talent, legal liability)
Determine cost of using outside consultant, if appropriate
Present cost-benefit analysis to Finance for approval
Negotiate flexibility to adjust the budget based on actual results
Obtain approval for outside consultant fees

COLLECT DATA
How will the analysis be structured, i.e. by AAP establishment, by region, by
business unit, etc.?
What will be the unit of analysis, i.e. pay grades, job titles, other compensation
grouping variable?
Define the reporting groups, i.e. Race? Gender? Age?
What are the legitimate, non-discriminatory factors driving pay in our company?
E.g. Seniority
Have factors been consistently defined and applied? E.g. what defines
“relevant experience”?
What employee data is in our database/HRIS?
Who will pull employee data from the database/HRIS?
How will other data/factors be collected and by who?
How will we ensure the data is accurate and complete?
Pull / request employee data

Your Partner in Human Resources and Affirmative Action

Project Checklist for Conducting Internal
Pay Equity Analysis

Review employee data for accuracy, completeness

Fill in missing data, correct errors

CONDUCT STATISTICAL ANALYSES

Perform a preliminary analysis of employee data using statistical tests
Isolate employee groups where pay variance is statistically significant and
determine next steps for further analysis
Conduct cohort analysis, where applicable, to compare employees within a
pay group
Conduct multiple regression analysis, where applicable, to determine the influence
of legitimate, non-discriminatory factors on pay and to determine the influence of
race, gender, age, for example, on pay
Conduct statistical cohort analysis to calculate actual vs. predicted salaries
Identify employees whose pay variance is unexplained by legitimate non-
discriminatory factors
Identify employees whose pay has reached or exceeded range maximum

DETERMINE ACTION PLAN

Calculate cost of adjusting pay for flagged employees
Determine strategy to address red-circled employees; calculate red-circle
costs/savings
Re-run preliminary analysis on adjusted salaries before finalizing changes
Seek legal advice before finalizing changes
Make revisions, if necessary
Renegotiate original budget, if necessary
Plan for timing/communication of adjustments and red-circles
Coach individuals/managers who will be delivering the communication
to employees
Communicate adjustments and red-circles to affected employees

About Berkshire Associates

Whether identifying pay disparities, conducting market analyses, or providing support

to remedy pay issues, companies choose Berkshire because we are especially qualified
to handle a range of compensation challenges; including salary equity and compliant
pay practices. For over a decade Berkshire has been steps ahead of OFCCP, and has
consistently developed the processes and tools to help companies safeguard against
possible pay issues.

Your Partner in Human Resources and Affirmative Action

Project Checklist for Conducting Internal
Pay Equity Analysis

From the everyday pay practices to high-demand, complex regulatory situations, our
certified consultants know how to successfully accomplish your objectives. We are the ideal
choice, as demonstrated by the class of well-known and nationwide companies that have
chosen us as their provider of choice

For more information on how Berkshire can help you with salary equity and other
compensation challenges, please contact us at 800.882.8904 or bai@berskshireassociates.
com.

Facebook:
http://www.facebook.com/
berkshirehr

Twitter:
http://www.twitter.com/
berkshirehr

Berkshire Associates Inc., Corporate Headquarters

8924 McGaw Court, Columbia, MD 21045
Phone: 800.882.8904
Fax: 410.995.1198
Email: bai@berkshireassociates.com
Your Partner in Human Resources and Affirmative Action
Web: www.berkshireassociates.com