How to close gender pay gap with people analytics

Authored by Deloitte and Visier leaders

The pay gap—the amount women earn per dollar earned by men—has been steadily closing, from $0.77 in 2017 to $0.85 in 2021.^¹ And if current trends continue, pay equity could be achieved in 7.5 years, just ahead of the 2030 goal set by the Equal Pay International Coalition.

But for organizations that care about diversity and inclusion, a wait-and-see approach isn’t enough. People analytics can help. Organizations can dig deep into pay structures to identify potential pay gaps and then track key metrics to work on retaining women, promoting them, and paying them fairly.

Ready to dive in? Track these three metrics to close the pay gap.

1. Compa ratio

Achieving pay equity requires knowing about disparities in compensation between different groups. Tracking total compensation by demographic factors—like gender and age—can be a great starting point, but the data might not reveal who is particularly well or poorly paid for their role. That’s where compa ratio comes in. 

Compa ratio looks at the percentage of average pay for a role that an employee receives. If 100% is right on average, that means an employee with a compa ratio of 130% is compensated well above average and one with a compa ratio of 70% is compensated well below. 

First, look at compa ratio by gender for the organization as a whole. Then drill down into segments and teams to identify where the largest disparity exists. This is the place to start your investigation. Some questions to consider:

• How are starting salaries and raises determined?
• Where is there bias in the hiring or performance review process?

2. Turnover rate

In the midst of the Great Resignation, turnover and retention are top of mind for most organizations. But tracking turnover by gender, role, and tenure can also help with achieving pay equity. While employees leave organizations for any number of reasons, pay equity shouldn’t be one of them. Addressing this problem systematically is a big step forward to creating an environment that retains great people and their contributions.

The turnover rate shows the proportion of employees who leave the organization over a set period, and it provides myriad opportunities to drill down into key areas of focus. First, look at turnover rate by gender for the organization as a whole. Do men or women leave at a higher rate? Which departments have higher relative turnover?

Then identify when in their careers women are leaving your organization. Do new hires tend to leave quickly? Or are you losing long-tenured employees at a higher rate? Identify from where and when women leave at the highest rate and start your investigation there. Some questions to consider:

• If new hires leave at a higher rate, are your starting salaries competitive and unbiased? 
• If longer-tenured employees leave at a higher rate, are you providing learning, training, and advancement opportunities equitably?

3. Manager ratio

Research has shown that the pay gap is closing more quickly for women in management roles, and women managers received $0.90 per dollar in 2021 from $0.86 per dollar in 2020. And if this rate of change continues, women managers are on track to close the pay gap four years sooner than non-managers. 

Management roles tend to pay significantly more than non-management roles, so closing the pay gap within your organization requires women to be well-represented in these roles. The manager ratio—the percentage of employees who are managers—can help you track this.

First, look at manager ratio by gender for the organization as a whole and for each department and identify where female managers are particularly well or poorly represented. Looking at the gender ratio of the manager population can provide another view. Start your investigation in departments with relatively few female managers and try to find out how they differ from departments with better gender equity. Some questions to consider:

• Is there bias in your performance review and promotion process?
• Are women included in your hiring pipeline for all roles, including management?

Merging pay gap metrics

Compa ratio, turnover rate, and manager ratio: These three metrics work together. Efforts toward reaching equitable compa ratios flow through to improved retention and then career progression to manager roles. Comparing metrics against each other—like turnover rate compared to compa ratio for women managers—can yield deeper insights that organizations can use to direct their energy and attention. Improvement in each metric takes time, but with continued effort and help from people analytics, organizations can close the pay gap faster.

Source:

^¹ Visier Insights^™ Report: 2021 Gender Pay Equity Progress Hangs in the Balance