How to Understand Pay Equity Terminology: a Glossary of Terms

Most people understand that pay equity means equal pay for equal work. But when you start to figure out what equal work is, it can get complicated.

The reality is that no two jobs are exactly alike. So we figure out what are the important aspects of jobs and compare those. Then we look at whether the pay for those jobs is about the same.

When there are differences, we look more deeply to understand whether the pay differences are justified based on nondiscriminatory factors like experience or qualifications. If not, then we look at what it takes to bring the pay for those jobs up to what other people doing comparable work are being paid.

It's important to understand that often pay gaps are simply a function of when someone was hired. If an employee has been at the company for years with some raises, they may not be making what someone who was just hired is being paid. Pay gaps are usually not intentional.

Achieving and maintaining pay equity requires organizations to regularly assess compensation to make sure that people are being paid both fairly and competitively.

Here are some common terms used in pay equity analysis and what they mean to help you better understand how to makes sense of pay equity.

Pay Equity Glossary

Cohort Analysis: A deeper analysis of any pay gaps revealed by the regression analysis to explore possible reasons for the pay gaps. Sometimes it involves considering new or different data or interviewing decision makers to understand the basis for pay differences. Cohort analysis helps determine whether there are fair and equitable reasons that support the differences or whether there are inequities that should be addressed.

Comparable jobs: Jobs that are substantially similar in effort, skills, responsibilities, and working conditions and should be compensated equally.

Comparators: The effort, skills, and responsibilities in a particular job so that you can compare the actual work. Comparators often include working environment and conditions, especially when a job exposes someone to dangerous conditions. In the past few years, remote or onsite are also important distinctions in working environment.

DEI or DIB: DEI stands for Diversity, Equity, and Inclusion. DIB stands for Diversity, Inclusion and Belonging.

• Diversity: having differences. Diversity typically means representation across all dimensions of human difference such as age, gender, ethnicity, health, physical and mental ability, race, sexual orientation, religion, physical size, education level, personality traits, and other human attributes.
• Inclusion: everyone is included, visible, heard and considered and that people are not excluded because of who they are.
• Belonging: everyone is treated and feels like a full member of the larger community and can thrive.
• Equity: fair treatment for everyone and working to identify and eliminate barriers to opportunities

External Equity: When your organization's compensation is competitive with similar organizations in your industry and sometimes area. It's comparing compensation for your organization's jobs against what people in similar jobs are paid elsewhere.

Internal Equity: When there are no pay gaps between comparable jobs and/or any pay gaps can be explained by legitimate business factors such as skills, proficiency, accumulated knowledge and experience, or increased responsibility.

Job Structures: A pay hierarchy based on the skills, duties, responsibilities, and compensable factors that contribute to your organization's goals. It's sometimes called pay grade or compensation level. Job structures organize jobs for pay equity analysis and for consistency in applying your compensation strategy and philosophy.

Multivariate regression analysis: A statistical method for comparing pay and demographic variables such as such as gender, race, age, tenure or any other factor you want to explore. Multivariate regression analysis results in a chart, or model, that shows where pay gaps exist and whether they are statistically correlated to any of demographic variables such as race, age, disability and gender.

Pay Equity: Pay equity is an essential aspect of DEI. At Salary.com, we define Pay Equity as: equal pay for comparable jobs that is internally equitable, externally competitive, and transparently communicated.

Pay Transparency: When what people in your organization get paid is not secret. It often means that you tell candidates what the salary range is during the hiring process and sometimes in the job posting. It also means talking about pay and pay equity internally and communicating your compensation philosophy so that everyone understands why they get paid what they're paid.

Pay equity is required by both Federal and State laws and there are often some differences in definitions and practical application depending on which law applies. If you are analyzing pay equity at your organization, it's important to get your employment attorney involved early on so they can guide you on the legalities and help you keep your analysis confidential.

To learn more about Salary.com's approach to Pay Equity, read the Plunkett Pay Equity Framework.