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Tuesday, 06 Jun 2023


Continued pressures from investors, regulators and employees have led an increasing number of organizations not only to conduct regular pay equity analyses but also to disclose results. Generally, Merit recommends that disclosures, which might appear in the ESG report, include three key elements:

  1. A statement affirming the organization's commitment to fair pay and ongoing review of practices and outcomes

  2. A summary of the most recent analysis undertaken, within the last year, including the highest-level results—differences in pay between women and men and between people of color and whites after accounting for differences in experience, roles occupied, and other defensible, compensable factors

  3. Information relating to efforts to ensure equity in opportunity to reach the highest-paid roles, which might include an all-in measure like the median pay gap but should, at minimum, include information on supportive DEI practices (e.g., mentorship and sponsorship programs, investments in training, recruiting and promotion practices)


MORE QUESTIONS

After disclosing, organizations need to be ready to address a myriad of follow-up questions that will arise from stakeholders and to defend critical decisions made in conducting their analyses. Questions Merit has helped organizations address include the following, across five key categories:

Study Scope
  • Who was included in the study? Were there any exclusions (e.g., executives, countries, contractors)?
  • What elements of pay were included? In addition to base pay rates, were incentive pay programs examined?
  • What are the defensible reasons for pay differences taken into account by the analysis?
Diverse Groups Examined
  • Were specific race groups examined—beyond the non-white vs. white categorization?
  • Were women of color looked at as a distinct group, and what about Asian women, Black women, and Hispanic women?
  • What other dimensions of difference were examined (e.g., LGBTQ+, gender identity, disability)?
  • For all groups examined, what were the findings?
Actions Taken
  • If there were issues found, what actions were taken?
  • Were adjustments limited to base pay or were actions taken relating to differences in incentive pay?
  • How much was spent in remediating pay differences?
Broader Context
  • If performance was taken into account as a defensible reason for pay differences, what is being done to ensure fairness in performance evaluation?
  • What steps are being taken to ensure equity more broadly than pay? Is equity in advancement being assessed?
  • Can you speak to broader efforts you are making to promote DEI?
Ongoing Commitment
  • How have pay gaps changed since last year's study?
  • What steps are you taking to limit pay disparities from emerging in the first place?
  • Will you look at pay equity regularly going forward? How frequently?


Effective preparation requires careful, thorough analysis up front and engagement with executives and managers to ensure clear and consistent messaging. Whether or not the organization is ready to disclose, such preparation and associated proactive review will ensure that leaders are not caught off guard when questions arise in stakeholder meetings.

With regard to employees, disclosure and effective response to the above questions are critical to ensure they trust that pay is fair and that the organization is committed to that result, as many researchers have shown perceptions of pay equity are more critical than pay levels in driving workforce productivity.

If your organization is struggling with its approach to pay equity or related disclosures, or if you have a success story that you would like to share, we welcome your perspective. Please reach out to us at payequity@meritanalyticsgroup.com.



For more insights from Merit on pay equity, join us for our presentation at the upcoming WorldatWork Total Rewards conference in June 2023.

Want to learn more? Please feel free to contact us at Merit Analytics Group at info@meritanalyticsgroup.com