Pay Audit
What it is, why it matters, and how to do it right
A pay audit is a structured process where you review and analyze employee compensation data to identify any unfair or unexplained pay differences between roles, genders, or other groups.
Pay audits help organizations ensure fair pay practices, comply with equal pay laws, and promote a more inclusive and equitable workplace.
- Ensure pay equity
- Become compliant
- Build trust in your organisation
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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.
The Impact of Fair Pay on Employer Branding
"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
Pay audit step-by-step
Planning
- Define clear purpose and scope
- Engage HR and management teams
- Include union representatives
Data Collection
- Collect salary and role details
- Adjust part-time to full-time
- Comply strictly with GDPR rules
Job Evaluation
- Identify comparable roles clearly
- Classify job value consistently
- Document evaluation process
Data Analysis
- Compare wages within same roles
- Identify patterns and anomalies
- Clarify wage-impacting factors
Action Plan
- Correct unjust wage disparities
- Update policies and guidelines
- Schedule regular follow-ups clearly
Documentation
- Summarize previous year’s results
- Record current survey outcomes
- Specify planned salary actions
"Our platform is backed by one of the brightest tech teams I've ever worked with. The result? The solution combines the power of advanced analytics with the simplicity of one click."
- Henrik Carlson, CTO at Pihr
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.
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.
Frequently asked questions
How often should a salary survey be carried out?
Different countries have different requirements. Some countries require every two years others yearly.
Do we have to include parental leave or fixed-term employees?
Yes, the salary survey must cover all employees regardless of their employment status.
Does this only apply to basic salary?
No, it does not. Allowances, bonuses and benefits should also be analysed to get the full picture.
How do we know if two jobs are equivalent?
Through job evaluation that takes into account knowledge, responsibility, effort and working conditions.
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:
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Responsibility: The scope and nature of accountability and decision-making authority.
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Skills and Competencies: Qualifications, experience, and capabilities required for the role.
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Effort and Working Conditions: Physical, mental, and emotional demands, as well as environmental factors.
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.
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