Pay equity analysis

Pay equity analysis tests whether employees doing comparable work are paid comparably, after accounting for legitimate factors such as role, level, location, tenure and performance. The core technique is a regression analysis that predicts pay from those legitimate factors, then checks whether gender, race or other protected characteristics still explain a statistically significant portion of the remaining pay difference once legitimate factors are controlled for.

This differs from a simple raw pay gap, which compares average pay across groups without controlling for role or level and often reflects representation differences, for example fewer women in senior roles, rather than unequal pay for the same work. Both figures matter, but they answer different questions and are easy to conflate in public reporting.

Organizations run pay equity analyses proactively to find and remediate gaps before they become legal exposure, and regulations in a growing number of jurisdictions now require pay-gap or pay-transparency reporting, with specifics that vary significantly by location, so this is general background, not legal guidance. Common pitfalls include grouping roles too broadly, which hides real gaps inside an overly wide "comparable work" bucket, and treating a one-time clean analysis as sufficient rather than rerunning it as pay and workforce planning decisions accumulate over time.