Home > Resources > BLOG > 5 Key Steps to Help You Run a Successful Gender Pay Gap Audit

5 Key Steps to Help You Run a Successful Gender Pay Gap Audit

Running a gender pay gap audit is a crucial step in closing an organisation’s wage gap. At first, the idea of conducting a comprehensive, company-wide gender pay gap audit may ...

5 Key Steps to Help You Run a Successful Gender Pay Gap Audit

Running a gender pay gap audit is a crucial step in closing an organisation’s wage gap. At first, the idea of conducting a comprehensive, company-wide gender pay gap audit may seem overwhelming – but with the right tools, an audit can deliver invaluable data and insight into what is causing your pay gap.

Armed with this critical information, you can establish a gender parity policy and implement inclusive strategies that drive positive change.

What is a gender pay gap audit?

A gender pay gap audit is an in-depth analysis of an organisation’s pay practices to determine the disparities in pay between female and male employees. The aim of a gender pay gap audit (also referred to as a pay equity analysis or gender wage gap assessment) is to determine the extent, causes and underlying factors of an organisation’s gender pay gap.

This process involves collecting data in relation to employee salaries, roles and responsibilities. The data can then be analysed to identify the underlying factors that contribute to pay disparities.

5 steps to conducting a successful gender pay gap audit

To gain insights into what goes into a gender pay gap audit, we spoke to Stacey Hill, one of ELMO’s lead product managers.

Stacey is a remuneration expert who is passionate about gender equality and finding ways to help customers close the gender pay gap within their organisation. With her extensive experience, Stacey was able to provide invaluable insight, tips and strategies for conducting a successful gender pay equity analysis.

1. Create a remuneration and benefits policy for your business

A remuneration and benefits policy outlines how an organisation compensates employees for their work. It details the salary, bonuses, leave entitlements, superannuation and other benefits that employees are entitled to. The purpose is to ensure that pay rates for all employees are fair and equitable, preventing discrimination based on gender, race or other traits.

For Stacey, this is the first step in running a successful gender pay gap audit. “If you don’t have gender parity in your remuneration and benefits policy, then what are you working towards?” she says. “You need a framework to make sure those standards are consistently applied to everybody to ensure gender pay equity.

“For example, if your policy states that everybody in the company should be above 100% compa-ratio (an employee’s compensation in relation to the midpoint of the industry standard), and no one in the company should receive an increase above 20% or below 1%, then there are rules in the system that can govern that. This can prevent you from paying 20% to an already well-paid male employee and only 1% to a low-paid female employee,” Stacey says.

Having the ability to measure your progress against a predefined metric allows you to assess your effectiveness in closing the gender pay gap. It also empowers you to stay focused and make adjustments if you notice that your numbers are sliding backwards.

A few examples of remuneration and benefits policy items that combat gender inequality include:

  • Conducting a gender pay gap audit to identify gaps regularly (quarterly, bi-yearly or yearly)
  • Allocating a budget to address gender pay gap discrepancies
  • Implementing a gender-neutral performance management framework
  • Providing flexible work policies and equal parental leave for female and male employees

  2. Analyse your data

Now it’s time to collect the hard data and discover where your organisation stands. Collect information such as base salary, bonuses and incentives received, benefits, and superannuation across departments and job categories. The type of information you use to carry out the audit will depend on which reporting methodology you choose.

The most commonly used reporting methodologies are:

  • Full-time equivalent (FTE) gap: The FTE gap methodology standardises the gender pay gap by considering full-time equivalent employees. It calculates the average or median earnings based on the assumption that all employees work full-time
  • Mean/median earnings gap: This involves comparing the average or median earnings of men and women within an organisation or industry.

You should also consider whether to analyse base salary alone, or include overtime, bonuses and additional payments. For example, Australia’s National Pay Gap (using data from the ABS) is calculated using base salary for full-time workers. While the Workplace Gender Equality Agency’s gender pay gap is calculated using annualised full time equivalent salaries of casual and part-time workers, including base salary, overtime, bonuses and additional payments.

What matters most is consistency. Choose a methodology you plan to stick with to calculate your gap both now and in the future.

“You need to collect your data, analyse it and see how big the gap is,” Stacey says. “That will help you get a baseline you can measure against your policy. You can’t fix what you don’t measure, and analysing your data is a really important step.”

Stacey understands that this might be a daunting task for some organisations who are concerned about the state of their gender pay gap and what the numbers might reveal, but she argues it’s the only way to make meaningful change.

“Once you know where you are, you can make incremental steps towards fixing the gender wage gap. And you can also make sure you’re not employing measures to widen that gender inequity.”

If you’ve identified pay gaps within like-for-like roles, it’s important to rectify them. Legally, employers must pay all employees equally for work of equal or comparable value.

But best practice organisations go beyond like-for-like roles. They compare similar roles across departments (for example, the salary of the Head of Marketing compared to the Head of Sales). They also examine the performance management process and whether bias is impacting reviews, pay rises, and bonuses.

3. Be transparent about the results

Stacey believes that transparency is key to closing the gender pay gap and is a crucial step after the initial audit is run. “If an organisation really wants to initiate change, then they need to be honest and accountable,” she says.

Being open and transparent about the state of the organisation’s gender pay gap, as well as the policies and strategies that are in place to address it, sends a clear message to employees: We’ve acknowledged the issue and are committed to resolving it because we value gender equality. This approach holds the organisation accountable and empowers them to drive positive change.

4. Set goals and measure them

The next step involves establishing clear goals and measuring them to accurately track the organisation’s progress in addressing gender pay disparity. By doing so, you can effectively monitor and evaluate the advancement made towards achieving pay equity within the organisation.

“A lot of organisations seem to stop after point one, which is simply sharing the policy. More progressive companies will also complete steps two and three, which focus on remedy. But it’s critical that companies don’t just stop there,” Stacey explains.

It’s important to commit yourself to measuring your goals on a regular basis. The cadence can be as frequent as your company needs it to be – whether that’s quarterly or bi-yearly.

Checking in regularly will help you to monitor progress. “It’s easy to go backwards if you stop analysing and measuring,” says Stacey.

This is also an opportune time to review your company policies to ensure they’re up to date and compliant with any new legislative changes.

5. Create an inclusive hire and promote process

The final point that Stacey raises is one that some organisations may not consider: the need to establish an inclusive hire and promote process.

Stacey explains: “Over time, it’s possible for someone with a long tenure in the company to fall below the Compa-ratio. This could be because when you hire new staff, you’re offering a high starting salary as well as other benefits. This means there could be a disparity between a new hire and someone who’s got a long tenure. So you might have a working mum who’s been with the business for ten years, but who is earning less than the new guy who’s just been hired with a significant sign-on bonus.

“It’s important to make sure you’re compensating people correctly based on their experience in the company and their business knowledge.”

By establishing an inclusive hire and promote policy, you can lay the foundation for a fair and equitable workplace culture. This ensures that all employees within the company receive the same opportunities for growth and development and that employee compensation is free from bias.

The importance of data when measuring your gender pay gap

The importance of data cannot be understated when it comes to measuring the gender pay gap within your organisation.

Data not only provides an accurate representation of your company’s gender pay gap but also helps you gain a comprehensive understanding of where and why the gap exists. Once armed with this invaluable data, you can use it to build compelling business cases and initiate effective measures that can help close the gender pay gap.

But how do you obtain this data in the first place?

If you’re not sure where to start your gender pay gap investigation, an HRIS can help. An HRIS such as ELMO’s can equip you with the numbers you need, giving you access to real-time reporting that can enable a transparent, end-to-end remuneration process. In addition, it can help you establish policies through rules-based modelling, ensuring that decision-makers align with your key remuneration initiatives. To learn more about how ELMO Remuneration can support you, make sure you visit our product page.

Want to keep up-to-date with ELMO’s content? Subscribe to our newsletter for first-look access to our free research, blogs, and resources.