Common Reasons for Flagged Pay Differences - The National Law Review
Some employers have a practice of periodically conducting statistical analyses of employee compensation, under attorney-client privilege, to identify potential areas of risk related to pay equity concerns. These analyses are usually focused on gender and race or national origin. Through these statistical analyses, employees are placed into comparator groups and the compensation of the employees in those groups is analyzed for differences that remain after controlling for relevant factors available in the data set. Such factors may include data points such as job title, tenure with the company, time in position, location/market, and performance ratings. Once the analysis has controlled for the available factors, the statistical model will flag those comparator groups where the pay differences are statistically significant and adverse to a particular demographic.
The analysis work does not end there. Further work may be needed to determine whether pay differences of those within flagged groups can be explained by legitimate, nondiscriminatory factors—either within the data set or outside the data set. This is critical because the statistical models can only control for data that is available within the data set. There are many factors that may legitimately explain pay differences but that cannot be used in the statistical analysis. This requires a “deeper dive” analysis of those comparator groups that have been flagged. Below are some of the common...
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