Regular reviews help organizations identify pay gaps early. A clear action plan turns findings into change. 

Pay has always been personal, but as expectations for transparency grow among employees, it is becoming more public, too. Employees want to know whether their pay is fair. Organizations that cannot demonstrate fairness or explain their pay decisions with data and documentation risk losing both trust and talent. 

The stakes are clear. According to Mercer, employees who see their pay as fair are 21% more likely to stay. Yet just 55% of employees worldwide believe they are paid fairly, according to Mercer data drawn from more than 2.7 million respondents. 

Brian Stucky, PhD, senior principal and pay equity solution leader at Marsh, says the benefits extend beyond retention. 

“It gives employees confidence that pay decisions are made thoughtfully and that there isn’t bias that creeps into the pay,” he says. “Trust is a major issue right now between employees and leadership, and anything that builds trust is a good thing.” 

A pay equity analysis helps HR teams explain pay decisions and build that trust. 

What Does a Pay Equity Analysis Measure? 

Pay equity is often confused with pay equality. Equality means paying everyone in the same role the same amount. Equity considers whether pay fairly reflects each person’s contribution, recognizing that experience and performance can vary even among people with the same title. 

A pay equity analysis puts that principle into practice by identifying the size and scope of pay gaps and segmenting them by role, level, tenure, and demographic factors. It depends on consistent data covering every component of pay. 

Regarding frequency, Stucky says, “Organizations are at least conducting analyses annually. Some will do so semi-annually or quarterly. The benefit to more frequent assessment is that issues are caught early. The risk is in analysis paralysis, when the same results are viewed overly-frequently, an apathy can set in which hinders actions.” 

Start With a Clear Strategy 

Don’t make the mistake of just jumping into an analysis—HR and compensation teams should work together to create a strategy that aligns with business goals. 

“We see that organizations are eager to start the analysis but often do so without having a clearly articulated goal to guide the project,” Stucky says. “The lack of a strategic focus becomes evident at the end of the work when it’s time to take action and the outcomes become material. That’s when the hard questions are asked.” 

Stucky recommends answering the following two questions at the outset. 

• Why are we doing this work?  

• What will we do if we find pay gaps? 

Clear answers to these questions help keep the process moving once results arrive. 

He also notes that technology can support the work, but it can’t lead it. “AI can and is helping throughout the process but it can’t make final decisions,” Stucky says. “It is providing evidence, but leaders still need to make critical decisions and act with confidence.” 

The analysis should also consider how the organization structures total compensation. “The majority of organizations do consider total compensation,” he explains. “But the ‘right answer’ depends on the organization and the degree to which they reward in fixed or variable compensation.” 

Turn Findings Into Action 

Identifying gaps in pay equity is just the starting point. Mercer’s Pay Equity Assessment advises documenting the findings and methodology, sizing gaps by role, level, tenure, and demographic factors, and building a remediation road map. Organizations can address the largest gaps first, then moderate them over two to three cycles. For organizations with a high risk of pay equity gaps, Mercer suggests budgeting .1% to .3% of payroll for baseline adjustments. 

Closing gaps is only part of the work. Pay equity checks belong in promotion and compensation reviews, and managers need training on fair pay decisions. A compensation leader or HR executive should own the program, and annual or biennial audits keep progress going. 

Make Pay Equity an Ongoing Practice 

A single analysis can reveal current disparities. Pay equity is an ongoing priority, not a one-time audit, so reviews should happen regularly—be it quarterly, annually, or biennially.  

“It is a matter of risk avoidance (correcting issues before they emerge) and paying employees for their skills, experience, and contributions to the organization, rather than their demographic background, is just the right thing to do,” Stucky says. 

Organizations earn trust by reviewing pay regularly—and knowing how they will act on what they find.