two numbers · two arguments · neither tells the whole story alone
Pay equity analysis at the strategic level
The raw gap and the adjusted gap measure different things. The exam — and the litigation — require both. Senior HR runs the analysis annually under attorney-client privilege, fixes the gap, then fixes the practice that produced it.
raw gap · all jobs aggregated
17%
Total comp by demographic. The headline number on press releases, regulatory filings, and shareholder proposals.
adjusted · controlled for job, level, tenure
2–3%
Multi-variable regression. The Equal Pay Act tests this floor. Anything above 2–3% deserves investigation under privilege.
the raw story · what the public sees
Drives EU CSRD & UK gender pay gap reports
Captures both pay setting AND representation — fewer women in senior roles is part of why the raw gap exists. Closes only via representation, not pay tweaks. Press, journalists, shareholder proposals all cite this number.
the adjusted story · what the law tests
Equal Pay Act & Title VII disparate impact
Multi-variable regression controlling for legitimate factors — job, level, tenure, location, performance. What remains is the unexplained residual. Plaintiffs and DOL/EEOC examiners use this number.
what gets controlled out — the legitimate factors
job family + level + tenure + location + performance + shift= unexplained residual
If the residual still favors one group after these controls, that\'s the action list. Not the raw 17% — the residual. Senior HR runs the analysis under attorney-client privilege so remediation can happen without creating litigation exposure.
why one-time fixes reopen
Closing the gap once without changing the practice = gap reopens.
Pay equity is an annual cycle: analysis → remediation → practice change → re-analysis. The practice changes — pay-band discipline, promotion calibration, comp committee training — are what prevent the residual from reaccumulating. Without them, you\'re paying the same fix three years later.
Exam Traps
Raw gap ≠ adjusted gap
Raw gap measures total comp by demographic. Adjusted controls for job, level, tenure. Senior HR communicates both honestly.
Same-job equity is the legal floor
Equal Pay Act requires equal pay for substantially equal work. Adjusted analysis tests this. Raw gap requires representation analysis.
Privilege drives sustainable analysis
Attorney-client privileged analysis allows correction without litigation exposure. Senior HR engages counsel to structure analysis.
Remediation must be paired with practice
Closing gap once without changing practice = gap reopens. Senior HR fixes pay-setting and decision practices, not just current gaps.
Public raw gap without adjusted is dangerous
Raw-only disclosure invites mischaracterization. Senior HR explains adjusted alongside raw, with statistical rigor.
Annual analysis + practice change
Pay equity is annual cycle. Analysis → remediation → practice change → re-analysis. Senior HR makes it operational, not one-time.
Total comp by demographic group. Surface-level number.
Job level, tenure, location, performance — control out legitimate factors.
What remains after legitimate factors. Should approach 100%.
Specific roles or managers with unexplained gaps. Investigated individually.
Adjustments paired with practice changes. Annual re-analysis.
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