Pay equity audit before posting ranges: find the problems a public range will expose

Posting a salary range does two things. It tells candidates what the job pays, and it tells everyone already in the job what the company would pay their replacement. If the people doing the work today earn less than the posted floor, or if pay for the same work differs by gender or race without a reason you can show, the posting puts that in public. A short pay equity check before the first ranges go live finds those problems while they are still cheap to fix. This page covers the check, how to explain or fix what it finds, and the state laws that reward employers for doing it.

What a posting reveals

Three situations come up in almost every first round of posting:

• Incumbents below the new floor. The market moved and pay for long-serving staff did not.
• Unequal pay for the same job. Two people with the same title and scope, hired a year apart, on different salaries because one negotiated harder or came in from a higher-paying employer.
• A pattern. Across a job family, women or a racial group cluster at the bottom of the band.

The first is a retention problem. The second and third can be legal ones. Under the federal Equal Pay Act, 29 U.S.C. 206(d), unequal pay between men and women for equal work is lawful only if it results from a seniority system, a merit system, a system measuring earnings by quantity or quality of production, or a factor other than sex. Many states go further, covering more protected characteristics and "comparable" rather than equal work.

The pre-posting check, step by step

1. Group the jobs

Put employees in groups that do the same or substantially similar work: same level, similar skill, effort, responsibility and working conditions. Job titles alone are not enough; Massachusetts' statute says a title or description "alone shall not determine comparability." This grouping is the hardest step and the one most worth getting right.

2. Collect pay and the factors that should explain it

For each person: base pay, bonus or commission, location, start date, time in role, performance rating, and any documented reason for their starting pay. Use the same pay definition throughout; Oregon's statute, for example, counts wages, salary, bonuses, benefits and equity-based compensation as compensation.

3. Compare each group to the range you plan to post

This is the step specific to posting. For each group, list anyone below the planned floor and anyone above the planned ceiling.

Example (illustrative figures)
Job: Customer Success Manager II   Planned posted range: $78,000 to $92,000

Employee   Base      Start     Rating   Below floor?
A          $81,000   2021      Meets    No
B          $74,500   2019      Exceeds  Yes, by $3,500
C          $88,000   2024      Meets    No
D          $76,000   2022      Meets    Yes, by $2,000

B is the classic case: a longer-tenured, higher-rated employee earning less than a new hire would, because B was hired before the market moved.

4. Look for patterns, not just outliers

Within each group, compare average and median pay by gender and, where you have the data, by race and ethnicity. For small groups, look at each person instead of averages. Larger employers usually run a regression controlling for legitimate factors; smaller ones can get far with a sorted spreadsheet and honest notes. The EU Pay Transparency Directive uses a 5% unexplained gap in any category of workers as the trigger for a joint pay assessment, which is a reasonable flag even for employers it does not cover.

5. Explain or fix every gap

For each gap, write the reason. If the reason is a legitimate factor applied consistently (tenure, a documented merit increase, a different location), keep the record. If the reason is "negotiated harder" or "prior salary," that is not a reason most states accept. California's Labor Code 432.3(k) says prior salary cannot justify a disparity in compensation. Plan an adjustment.

6. Adjust before the posting goes live

Bring incumbents at least to the new floor, or schedule it with a date. Do not cut anyone's pay to close a gap; Massachusetts, Oregon and the federal Equal Pay Act all prohibit reducing pay to comply. Budget for this in the same cycle as the hiring plan.

Cases that need a judgment call

A job with one incumbent

There is no one to compare within the job, so compare against the jobs closest to it in level and value, and against the range you plan to post. If the sole incumbent is below the posted floor, the posting will be read as a statement about them.

Someone above the posted ceiling

Usually fine if the reason is tenure or a documented promotion in place. Some employers "red-circle" such pay: frozen until the range catches up. Record the reason. Newfoundland and Labrador's public-sector pay equity law, for example, lists red-circling as a recognized reason for a pay difference in a downgraded position, which shows how these cases are usually treated.

Counteroffers and retention raises

A raise given to keep one person who had an outside offer is a common source of unexplained gaps. If you match an outside offer, check whether peers doing the same work need the same adjustment; see the counteroffer conversation script for the candidate side.

Different locations

Location is a factor most laws accept, including Massachusetts, which lists "the geographic location in which a job is performed." Apply the same location factors to everyone; a location premium paid to some people in a city and not others is not a location factor.

Very small employers

A ten-person company does not need statistics. It needs one honest page: each role, each person's pay, the posted range, and a sentence explaining any difference. Massachusetts' statute allows a self-evaluation of the employer's own design so long as it is reasonable for the employer's size.

State laws that reward a self-audit

Each defense requires both the analysis and follow-through. An audit that finds gaps and leaves them in place can be worse than none, so budget for fixes before you start.

Records to keep

• The grouping logic and who decided it.
• The data snapshot with its date.
• Each gap and its explanation, or the adjustment made and when.
• The posted range derived from the analysis. See how to set salary ranges for job postings.

California also requires employers to keep each employee's job title and wage rate history for the duration of employment plus three years, and Colorado requires job description and compensation history for the duration of employment plus two years; see the Colorado guide.

Keeping it fair after the posting

The audit is a snapshot. New hires are where gaps start again, because starting pay is the one point where an individual negotiation sets pay for years. Three habits keep the next audit short:

1. No pay history in the process. Many states ban the question; see salary history ban states. Where it is legal, it still imports the last employer's gaps.
2. Written reasons for where each offer lands within the range, using the same factors every time. The offer approval form template has a field for it.
3. Check new offers against incumbents before approval, so a strong new hire does not leap past colleagues doing the same work.

For the posting rules themselves, see pay transparency laws by state, and for the related federal workforce reporting, EEO-1 reporting requirements.