Equal Pay Audit

Q: How do you conduct an equal pay audit step by step?

The process typically includes five steps: Plan – define scope and governance. Collect data – gather pay and compensation data and ensure GDPR compliance. Evaluate roles – assess jobs using objective, gender-neutral criteria. Analyse – identify pay gaps and patterns. Act and document – address unjustified gaps and document actions.

Q: Are equal pay audits required across the EU?

Legal requirements vary by country, but employers across the EU face increasing expectations around equal pay and transparency due to the EU Pay Transparency Directive.

Q: How often should an equal pay audit be conducted?

There is no single EU-wide frequency. Many organisations conduct equal pay audits annually, often aligned with compensation reviews.

What it is, why it matters, and how to do it right

An equal pay audit is a structured process where you review and analyse employee compensation data to identify any unfair or unexplained pay differences between roles, genders, or other groups.

Pay audits help organisations ensure fair pay practices, comply with equal pay laws, and promote a more inclusive and equitable workplace.

Get started today

Benefits of Conducting a Pay Audit

Legal Compliance
Stay ahead of regulations and avoid costly penalties.

Fairness and Transparency
Build trust with clear and equitable pay structures.

Enhanced Brand Reputation
Boost your image through fair pay, increasing employee engagement and market appeal.

Talent Attraction and Retention
Align your pay strategy with performance and market standards to attract and retain top talent.

EU Directive Readiness
Ensure compliance now and confidently prepare for the 2026 EU directive on pay transparency.

Download

eBook – Equal Pay Audits & the EU Pay Directive

eBook Equal Pay Audits & EUPTD in Sweden

Pay audit step-by-step

1

Planning

Define clear purpose and scope
Engage HR and management teams
Include union representatives

2

Data Collection

Collect salary and role details
Adjust part-time to full-time
Comply strictly with GDPR rules

3

Job Evaluation

Identify comparable roles clearly
Classify job value consistently
Document evaluation process

4

Data Analysis

Compare wages within same roles
Identify patterns and anomalies
Clarify wage-impacting factors

5

Action Plan

Correct unjust wage disparities
Update policies and guidelines
Schedule regular follow-ups clearly

6

Documentation

Summarize previous year’s results
Record current survey outcomes
Specify planned salary actions

Two business women and two business men, all in suits, around a table having a joyful discussion in front of computers and an iPad.

Common Mistakes and Pitfalls in Pay Audits

Unclear Objectives
Conducting analyses without well-defined goals or established criteria.

Incomplete or Inaccurate Data
Basing decisions on partial, uncertain, or flawed data sets.

Ignoring Total Remuneration
Overlooking bonuses, benefits, or other non-salary compensation.

Analyzing Without Context
Failing to consider responsibility levels, market conditions, or geographic factors.

Small Sample Size
Drawing conclusions from insufficient or limited data.

No Follow-Up Action
Performing surveys without implementing meaningful adjustments or improvements.

One-Off Interventions
Treating pay analysis as a single event rather than an ongoing process.

"Fair pay is a precondition for sustainable business. Our role is to make it easy to act - based on facts."

- Magnus Drogell, CEO & Founder of Pihr

Global Pay Audit Compliance

Pay Audit compliance is critical for global companies operating across multiple countries with varying labor laws. Nations like the UK and EU require regular pay audits and gender pay gap reporting, while others—such as Canada, Australia, and Iceland—enforce their own equity regulations. Failing to meet these requirements can lead to legal penalties and damage a company’s reputation.

To stay compliant, businesses must implement consistent pay audit processes, standardize compensation data, and tailor their audits to meet local legal standards. Collaboration between HR, legal, and compliance teams is essential, along with using analytics tools to uncover and address wage disparities.

Conducting regular pay audits not only ensures legal compliance but also supports diversity, equity, and inclusion goals. It shows employees and stakeholders that the company values fairness and transparency. Companies that lead in global pay audit practices are better positioned to attract talent, boost retention, and enhance their employer brand.

In today’s global market, a proactive pay audit strategy is more than compliance—it’s a competitive advantage.

Download the Pay Audit Guide

HR partners collaborating on Pay Equity across Europe

HR, tech and law firms partners collaborating on pay equity

FAQ: Equal Pay Audits

What is an equal pay audit?

An equal pay audit is a structured review of pay and total compensation to identify and address unjustified pay differences between employees performing equal work or work of equal value. The aim is to ensure fair, objective, and defensible pay decisions.

How do you conduct an equal pay audit step by step?

The process typically includes five key steps:

Plan – define scope, timeline, and governance.
Collect data – gather pay and compensation data, adjust part-time to full-time equivalents, and ensure GDPR compliance.
Evaluate roles – compare jobs using objective, gender-neutral criteria such as skills, responsibility, effort, and working conditions.
Analyse – identify pay gaps, patterns, and outliers.
Act and document – address unjustified gaps and document results and actions.

→ Digital tools can help standardise the process and ensure consistency.

Are equal pay audits required across the EU?

Legal requirements vary by country. However, employers across the EU face increasing expectations around equal pay and transparency. The EU Pay Transparency Directive (Directive (EU) 2023/970) sets common principles that Member States must transpose into national law by 2026.

How often should an equal pay audit be conducted?

There is no single EU-wide frequency that applies to all employers. Many organisations conduct equal pay audits annually, often aligned with compensation reviews.

Should employees on parental leave, part-time, or fixed-term contracts be included?

Yes. Equal pay audits should include all employee groups. Excluding certain groups can lead to inaccurate conclusions and increased compliance risk.

Does an equal pay audit only cover base salary?

No. An equal pay audit should cover total compensation, including bonuses, benefits, allowances, commissions, and other remuneration.

How do you determine whether two roles are work of equal value?

Work of equal value is assessed through a structured job evaluation based on objective criteria such as skills, responsibility, effort, and working conditions.

What happens if an employer does not conduct an equal pay audit?

Consequences depend on national legislation but may include regulatory scrutiny, legal exposure, and reputational damage.

The Difference Between Equal and Equivalent Work

A common misunderstanding occurs when distinguishing between "equal work" and "equivalent work." Clearly understanding this distinction is important to ensure that your pay audit is successful.

What is "Equal Work"?

Equal work involves tasks that are essentially the same or very similar, requiring comparable skills, efforts, responsibilities, and working conditions.

What is "Equivalent Work"?

Equivalent work refers to different roles or positions that, although distinct in their duties, carry similar value in terms of complexity, skill requirements, responsibilities, and overall effort.

How Do You Determine This?

Determining equal or equivalent work typically involves structured job evaluation, focusing on:

Responsibility: The scope and nature of accountability and decision-making authority.
Skills and Competencies: Qualifications, experience, and capabilities required for the role.
Effort and Working Conditions: Physical, mental, and emotional demands, as well as environmental factors.

Group of HR and Pay Equity colleagues discussint pay audits

Statistics & Trends: Why Pay Surveys Matter

Understanding the current landscape of pay equity is crucial for organizations aiming to foster fairness and compliance. Here are some key insights:

Gender Pay Gap in Sweden and the EU
As of recent data, the unadjusted gender pay gap in Sweden stands at approximately 10%, aligning with the EU average. This indicates that, on average, women earn 90% of what men earn for similar roles.

Compliance with Equal Pay Laws
Despite regulations, a significant number of companies fall short in adhering to equal pay standards. For instance, a study revealed that many organizations have yet to fully implement measures ensuring pay equity.

Impact on Brand Trust
Failing to address pay disparities can adversely affect a company's reputation. Research indicates that consumers are 32% more likely to choose a competitor after discovering a company's gender pay gap.

Insights from Pihr's Client Analysis
In our latest client analysis, 7 out of 10 companies identified unjustified pay differences during their initial assessment. This underscores the prevalence of pay disparities and the need for regular evaluations.