We all know that pay equity is important and a best practice, but as of January 1, 2021 it will be a law in Colorado and many other states have similar laws in place.
On November 10, 2020, the Colorado Department of Labor and Employment issued its final Equal Pay Transparency Rules. The Rules provide clarity on the requirements of the Equal Pay for Equal Work Act (“EPEWA” or “the Act”). These rules require employers to modify practices in hiring, promotion and determining pay. As described in our December Legal Update, employers must announce opportunities for advancement and job openings, including the pay range, benefits, and other compensation offered for each job opening to all current employees on the same calendar day and prior to making a promotion decision. They must also maintain records of job descriptions and wage rate histories for each employee while employed and for two years after employment ends. Finally, employers may not seek a wage history from prospective employees or as a condition of employment.
The Act prohibits employers from paying men and women differently when performing the same job, unless the employer can show at least one of the following apply to their wage determination:
- A seniority system.
- A merit system.
- A system that measures earnings based on quality or quantity of production.
- The geographical location where the work is performed.
- Education, training or experience, to the extent they are reasonably related to the work in question.
- Travel, if the travel is a regular and necessary condition of the work performed.
To navigate this new legislation, many employers are conducting wage audits to proactively address areas of concern.
What is an Equal Pay Audit?
An equal pay audit compares the pay of men and women doing equal work in your organization and identifies any differences in pay between men and women doing equal work.
How is an Equal Pay Audit Performed?
Define scope and project leader
Which positions will be included in the audit? Who will lead the project? Make sure the project leader has expertise in compensation and understands your compensation practices.
Collect the Data
REMINDER – this is highly confidential information and needs to be protected and secure. Remove all personally identifiable information from the data to ensure unbiased analyzation.
This information should include but is not limited to:
- Basic job status and historical employment information:
- Job title
- Job level
- Exemption status
- Hours per week
- Demographic information: gender, race, ethnicity, age, etc.
- Geographic work location and information on the department/unit, etc.
- Performance review history
- Pay range and compensation data to include historical pay increases
Analyze the Data
- Organize your data in one place to make it easier to digest.
- Determine which ways you want to group your jobs [by title, by position by department, by location, only full-time employees, etc.].
- Determine which employees are “comparable.”
- Review job descriptions to ensure the written description matches what the employees is doing.
- Compare your wages to industry standards and wages in your local area.
There are software programs that can assist with analyzing your data.
Review the Findings
Identify any differences between employees and investigate why there are discrepancies. Remember that pay discrepancies don’t always relate to discrimination – there may be other reasons for the difference.
The goal of this audit is to eliminate unequal pay. Once you have identified inconsistencies it is time to correct identified issues – adjust any wages that need to be changed. This is also an opportunity to restructure your compensation practices, update job descriptions and pay processes.
There are many great resources online to assist your organization with a pay equity audit:
- SHRM – pay equity templates and tools
- The Department of Labor’s Women’s Bureau has developed a 10-step equal pay self-audit for employers. http://hr.cch.com/hhrlib/issues-answers/conducting-an-equal-pay-audit.asp?date=july-3
- HR Executive offers 7 steps to a pay equity audit