Pay Equity Analysis Calculator
Pay equity analysis compares compensation between employee groups to identify unjustified pay gaps. A raw gap shows the simple difference in average pay, but legitimate factors like experience and performance explain part of that gap. The adjusted gap — after controlling for these factors — is the metric regulators and courts examine. The EEOC and OFCCP generally flag adjusted gaps exceeding 5% for further investigation.
Analyze Pay Gap
Enter average values for two employee groups being compared.
This is a simplified model for educational purposes. Rigorous pay equity analysis requires multivariate regression controlling for job level, location, tenure, education, and other legitimate factors. Consult a compensation analyst or employment attorney for formal audits. This is not legal advice.
Understanding Pay Gaps
| Gap Type | Definition | Significance |
|---|---|---|
| Raw Gap | Simple difference in average pay between groups | Headline number, but does not account for legitimate differences |
| Experience-Adjusted | Gap after accounting for differences in years of experience | Removes seniority-based pay differences |
| Fully Adjusted | Gap after experience and performance adjustments | Closest approximation of unexplained gap; regulatory focus area |
Regulatory Context
Federal law (Equal Pay Act, Title VII) prohibits pay discrimination based on protected characteristics. Many states have enacted stronger pay transparency and equity laws. Regular proactive pay equity audits help organizations identify and correct gaps before they become legal liabilities, and demonstrate good-faith compliance efforts.
Frequently Asked Questions
What adjusted gap threshold triggers concern?
While no single number is universally applied, an adjusted gap exceeding 5% between comparable groups is widely regarded as a red flag. The OFCCP uses a two-standard-deviation test in its analyses. Gaps of 2–5% warrant monitoring; gaps above 5% warrant remediation.
How often should pay equity analysis be conducted?
Best practice is annually, typically before the merit increase cycle so adjustments can be incorporated. Some organizations conduct analysis semi-annually or whenever significant organizational changes occur.