The COVID-19 pandemic, subsequent economic upheaval, and new attitudes toward work have resulted in unprecedented labor shortages. To combat the shortage, many employers are raising salaries, as well as offering signing and referral bonuses.

But increased pay can lead to issues with fairness, and concerns that affect an organization’s ability to attract and retain talent, not to mention legal issues. Employees who aren’t paid equally for what they deem equal work aren’t likely to stick around and may try to find relief through litigation.

As a result, pay equity has become a concern for management and governmental bodies. For instance, Colorado’s Equal Pay for Equal Work Act, which went into effect in 2021, mandates employers provide equal pay and benefits for employees doing substantially similar work.1 Other states have followed Colorado’s example with similar legislation.

Creating a strong culture through pay equity

Internal pay equity ensures that individuals performing comparable duties receive comparable pay while aligning with the external market, which, in turn, shows employees they are earning what is fair and equitable.

Organizations with a commitment to pay equity demonstrate a high degree of employee appreciation — and companies with a highly connected, transparent, and generous organizational culture are more likely to achieve their strategic goals.

It’s important to understand that equitable pay does not mean parity across jobs but developing a salary range for each job and appropriately assigning pay.

Here are four steps for organizations undertaking pay equity analysis:

  1. Develop a compensation philosophy. Before organizations can begin analyzing pay structures, they should have a coherent philosophy about compensation that will help ensure internal pay equity. Organizations need to have a Total Rewards (or similar foundation) on which to build compensation plans.
  1. Conduct a compensation study. Seeing what competitors for talent) are doing will provide a starting point in analyzing internal pay equity. Having solid benchmarks can guide HR professionals in determining what, exactly, is considered fair and likely to attract and retain employees.
  1. Conduct an internal pay equity analysis to identify discrepancies. The analysis will reveal apparent pay discrepancies between employees doing the same work. However, that doesn’t mean the discrepancies are not valid: Experience, education, job performance, and length of service are legitimate reasons for pay differences.
  1. Develop an implementation plan and communicate the plan to employees. Once an organization identifies pay gaps, it’s incumbent upon it to develop a plan — with help from legal counsel — to address the problems. Almost as important: Organizations should promote the new plan through effective communications to encourage acceptance throughout the workforce.

HUB International’s team of compensation and benefits experts work on a diverse range of HR needs, from risk management and regulatory compliance to benefits strategy, program design, and workplace culture.

1 Colorado General Assembly, “Equal Pay For Equal Work Act,” accessed December 8, 2022.