Mastering Data Challenges in Pay Equity Analysis

For many organizations, conducting a comprehensive pay equity analysis and providing transparency to employees is fraught with data management hurdles. The data required for these initiatives is often scattered across disparate systems, including HRIS (Human Resource Information Systems), payroll platforms, and performance management tools. This fragmentation makes it difficult to gather comprehensive and consistent information.

To address these challenges, this blog will explore strategies for mastering complex data challenges that many companies struggle to overcome—and how technology can bridge the gap—to enable effective pay equity analysis and foster greater transparency and trust within the workforce.

What data is needed for pay equity and transparency?

To conduct a thorough pay equity analysis, companies typically need the following data, along with details on where it usually resides:

Key data needed for pay equity analysis

1️⃣ Employee Compensation Data

Source: Payroll system, compensation management software.

Details: Base salary, bonuses, commissions, long-term incentives, benefits.

2️⃣ Job-Related Data

Source: HRIS (Human Resource Information System), performance management software.

Details: Job titles, job codes, job levels, and department information.

3️⃣ Employee Demographics

Source: HRIS or HR databases.

Details: Gender, ethnicity, age, and potentially other diversity metrics.

4️⃣ Experience and Tenure Data

Source: HRIS.

Details: Years of experience, length of service at the company, and prior job experience.

5️⃣ Performance Ratings

Source: Performance management software or appraisal records.

Details: Performance scores, reviews, or rankings.

6️⃣ Education and Qualifications

Source: HRIS or employee records.

Details: Education level, certifications, and training completed.

7️⃣ Location Data

Source: HRIS or payroll system.

Details: Office location, state or region (important for geographic pay differences).

Additional data for pay transparency reporting

Pay transparency reporting may use much of the same data but can also require more detailed breakdowns or additional metrics, such as:

Salary Bands and Ranges

Source: Compensation management software.

Details: Defined salary ranges for job roles or levels.

Job Descriptions and Qualifications

Source: HR databases or internal job postings.

Details: Specific duties, skills required, and qualifications associated with roles.

Market Benchmarking Data

Source: External compensation benchmarking tools.

Details: Industry standards for salaries and compensation by role and location.

Both pay equity analysis and transparency reporting rely on accurate, integrated data. Pay transparency may also require more detailed documentation and external data to contextualize pay structures and ranges.

The challenges of data management for pay equity and transparency

Examples of data challenges include:

• Fragmented data sources: Companies often have compensation, job titles, and performance ratings spread out across different platforms. For instance, compensation details might reside in a payroll system, while performance data is stored in a performance management tool. Merging these data sets without a unified system is cumbersome and time-consuming.
• Inconsistent data formats: Different departments or regions may use varied naming conventions for job titles, pay grades, and performance metrics. For example, one office might list job titles with department prefixes, while another uses simpler, inconsistent titles. These differences complicate cross-departmental analysis and can lead to inaccuracies in comparisons.
• Incomplete data: Missing data points are common, particularly in organizations that use manual data entry or legacy systems. If an employee’s tenure or education data is missing, it can create gaps that impact pay equity analysis. HR teams often have to invest considerable time in manual data checks to fill in these blanks.

Current solutions and their limitations

To address these issues, many companies resort to patchwork solutions. These often include spreadsheets, manual data audits, or custom-built integration scripts that pull data from various sources. While these methods can help gather data in one place, they come with significant limitations:

• Manual processes: Relying on spreadsheets or manual data compilation is time-intensive and prone to human error. A single oversight can skew results and lead to incorrect conclusions about pay equity.
• Data silos: Custom-built integration scripts or point-to-point connectors between systems may alleviate some issues but often require continuous maintenance. This approach is not scalable and becomes more fragile as an organization’s data grows in complexity.
• Security and compliance risks: Handling sensitive compensation data using manual processes or basic digital tools can create vulnerabilities. If data access is not properly controlled, there is an increased risk of non-compliance with data protection laws like GDPR or CCPA, or reporting requirements like CSRD or the EU Pay Transparency Directive.

The risks of relying on inadequate methods

When companies rely on spreadsheets or non-specialized tools, they face several risks:

• Data inaccuracies: Without automated validation tools, errors are more likely to go unnoticed, impacting the accuracy of pay equity assessments.
• Inefficiencies: Manual processes consume valuable HR and analytics resources, delaying insights and taking time away from strategic initiatives.
• Compliance pitfalls: Manual handling of sensitive data increases the likelihood of a breach or non-compliance with privacy regulations, which can lead to fines and reputational damage.

Addressing pay equity challenges with software solutions

1️⃣ Data collection and completeness

Challenges: Gathering a complete set of data that covers compensation, job details, and employee demographics is essential but can be daunting. Missing or inconsistent data distorts pay equity analysis.
Solution: Pay equity software on an enterprise-grade platform integrates with HRIS, payroll, and other systems, centralizing data and identifying missing fields. Automated reminders alert HR teams to fill in incomplete records, ensuring comprehensive datasets for analysis.

2️⃣ Data quality and accuracy

Challenges: Ensuring data accuracy can be challenging, especially with legacy systems and manual data entries that introduce errors.
Solution: Software solutions automate data validation and highlight inconsistencies, streamlining data cleansing. This ensures that records are accurate and standardized for effective analysis.

3️⃣ Confidentiality and privacy compliance

Challenges: Pay equity analysis involves sensitive demographic data that must comply with privacy regulations such as GDPR and CCPA.
Solution: Pay equity software, especially if SOC2 certified, provides built-in privacy tools, including anonymization and encryption, to safeguard data. Role-based access control ensures only authorized personnel can view sensitive information, reducing compliance risks.

4️⃣ Addressing data bias

Challenges: Historical data can contain embedded biases that skew analysis and perpetuate inequities.
Solution: Advanced pay equity platforms use statistical analysis and machine learning to detect and adjust for biases, allowing HR teams to focus on objective, fair criteria. This helps ensure that analysis does not unintentionally reinforce past inequalities.

5️⃣ Integration across systems

Challenges: Data needed for pay equity analysis is often dispersed across various platforms, making integration complex.
Solution: Pay equity software seamlessly integrates with different HR and payroll systems, automating data imports and exports to maintain synchronized, up-to-date information.

6️⃣ Tracking and maintaining data over time

Challenges: Companies need to maintain historical data for trend analysis and track the effectiveness of pay equity initiatives. Version control is crucial to avoid discrepancies.
Solution: Software solutions support comprehensive version control and maintain historical records, enabling year-over-year trend analysis to assess the impact of pay equity strategies.

Advantages of a total compensation platform

A comprehensive compensation platform that incorporates pay equity tools offers a holistic approach by allowing companies to manage sales compensation, bonuses, long-term incentives, and base pay in a single system. This unified view supports better decision-making, transparency, and consistency across compensation structures, enhancing trust and engagement among employees.

Finding a solution that works for pay equity and transparency

Dedicated pay equity software simplifies complex data management and ensures accurate, transparent pay equity analysis. By automating data collection, enhancing data accuracy, and supporting compliance, these tools allow HR teams to focus on creating fair compensation strategies that promote equity and trust.

PayAnalytics by beqom is a plug-and-play pay equity solution built by data scientists to support global organizations in making data-driven pay decisions. By embedding pay equity into every compensation process, beqom customers can ensure sustainable pay equity. Coupled with beqom Pay Transparency, companies can be fully equipped to create a culture of fairness and trust, and meet global compliance requirements.