Whither the Glass Ceiling? Conducting a Statistical Pay Audit

Abstract

Stepped-up enforcement and new government demands make it more likely than ever that companies will face an audit of their compensation practices by the federal government. And with only about 15% to 20% of companies that undergo some form of compensation audit emerging with a clean bill of health, most companies have a lot of work to do. The stakes could not be higher. Companies that are found to have discriminatory pay practices face not only fines, penalties and negative publicity but also the loss of trust from customers, employees and other stakeholders. This article outlines a process through which companies can determine whether their compensation practices discriminate against certain employee groups and take steps to correct those problems before the government steps in with an audit. Even if the government is already on the case, companies can use these statistical tools to defend themselves and potentially reduce the cost of remedies and penalties.