Pay Equity Consulting

What is Pay Equity?

Pay equity is a decades-old concept focused on ensuring workers receive equal pay for equal work or work of equal value, regardless of their gender, race, ethnicity, disability, age, or other factors that are not related to their individual skills, qualifications, or performance. In general, pay equity actions are intended to reduce or eliminate discrimination in pay practices so that fair compensation and benefits are delivered to employees. In recent years, changing societal norms and a growing patchwork of laws across the U.S. and Europe have added new urgency and attention to the question of how companies can make pay equity a sustainable business practice.

Why is Pay Equity an Ongoing Challenge for Companies?

Achieving sustainable pay equity across an ever-changing organization is not a simple or straight forward task. As individual employees come and go, as entities are acquired and divested, and as market dynamics around pay change, maintaining pay equity is a constantly moving target. Other common issues that make pay equity difficult for companies to manage include:

• Access to Quality Data – Finding and managing accurate internal and external compensation data is a long-standing issue for companies. If you don’t have reliable data, it is very difficult to measure potential pay gaps and it is also hard to explain pay decisions to employees and other stakeholders.
• Methodology – Pay equity analyses based on specific job roles and levels are often too granular to generate meaningful results, even for large employers. As a result, most pay equity assessments need to be pooled across groups of similar employees, considering factors like job family, job level, and job location. However, getting this right is difficult and requires a solid understanding of job architectures and legislative guidelines.
• Inconsistent Pay Practices – Many companies do not have well-defined pay practices that articulate how pay ranges are determined and how pay decisions should be made. For example, if managers don’t know how to deal with pay compression or have limited training on how to reward employees for different levels of performance, they will undoubtedly make sub-optimal pay equity decisions.
• Regulatory Complexity – Given the multitude of pay equity laws that exist across the U.S., Europe and other markets, there is no single standard for assessing, auditing, or reporting on pay equity. For example, some U.S. states now prohibit employers from asking job applicants about their salary history, while others allow this question under certain conditions. Similarly, some countries in Europe require employers to conduct regular pay audits and report on pay gaps, while others do not. This creates extra burdens for multinational companies, as they try to navigate and comply with different rules and expectations.

How Aon Can Help

At Aon, we guide clients through a three-step process to help them build sustainable pay equity practices. Each step in the journey is designed to directly and proactively address the challenges cited above.

Pay Equity Audit

Our work always begins with a comprehensive pay equity audit. Typically, we partner with clients to collect and standardize key compensation and employee data, and then conduct a multivariable regression modeling exercise to ask and answer the following questions:

• Is there evidence of gender and/or race/ethnicity-based pay gaps inside your organization?
• If so, what is the size of those pay gaps and are they statistically significant?
• What functions or divisions inside your organization pose the greatest concern for pay equity?
• What are both appropriate and problematic drivers of pay inside your organization?

Pay Equity Remediation

Next, we pivot to pay equity remediation strategies. Once the extent and location of pay equity challenges are understood, we can ask what steps are needed to move your organization in the right direction. Common questions to pursue include:

• Based on our pay equity audit, who is eligible for equity-based pay adjustments?
• How much will it cost to close pay gaps?
• Should changes be made all at once, or phased over time?
• How does your workforce composition contribute to pay gaps?
• Beyond making one-time adjustments to pay, do your hiring and promotion practices need to change to drive lasting results?
• What other policy changes are needed to make maintaining pay equity easier?

Pay Equity Monitoring and Governance

Finally, we empower clients to monitor and govern pay equity over the long-term. Key points of emphasis include:

• Institutionalizing pay equity best practices into your annual compensation cycle.
• Reinforcing or retooling job architecture frameworks and salary structures to support pay equity.
• Providing leave-behind tools and processes to monitor your ongoing pay equity position.
• Educating HR leaders and managers to guide compensation decisions through a pay equity lens.
• Leveraging our partnership with Trusaic to provide a pay equity platform to monitor issues on an ongoing basis.

Together, it is possible to make pay equity a sustainable business practice for your organization in a quick and efficient manner. While every situation is different, our engagements often span a period of eight weeks.

After our initial work together, we understand clients need ongoing visibility into the health of their pay equity strategy. Through Aon’s partnership with Trusaic, we can deliver more than a point-in-time audit and enable clients to continually monitor and prevent pay equity disparities. To learn more about how Trusaic can help you identify and resolve pay disparities, prevent pay inequities during the hiring process or during annual compensation cycles, as well as support global pay data reporting and compliance efforts, please click here.

Who Do We Partner With?

We partner with a wide range of functions at client organizations—including the board of directors, business leaders, and human resources, investor relations, risk management, communications and legal teams—to build sustainable pay equity practices. We can also work with external counsel if needed to ensure client privacy is protected.