Pay equality toolkit: Conduct an equal pay audit

If some of your workers are covered under an award, this is a good place to start. However, it is important to know that awards outline the minimum wages and conditions an employee is entitled to. Awards don’t apply when an enterprise agreement or other registered agreement exists. For more information, see the Fair Work Ombudsman’s list of awards.

It is also helpful to determine comparable work in other ways. A common challenge in a small organisation is having few roles that are similar to each other. This can be because there is a flat structure, workers perform multiple roles or workers’ responsibilities evolve during periods of organisational growth. Comparing roles against the following considerations can help address this challenge. List the roles in your organisation (including those under an award) and consider the requirements of the role, not the performance of the person currently in the role.

Consider each role in terms of:

• Leadership – is there a requirement for this role to contribute strategically to the whole organisation?
• Knowledge and skills – is there a requirement for this role to have technical and specialist know-how and/or knowledge of your business and your processes? One useful indicator of knowledge and skill is the qualifications and training needed for the job and the length of time experience needed to do the job fully.
• People management – is there a requirement for this role to manage or supervise others?
• Service – is there a requirement for this role to provide care or service to customers, clients or colleagues?
• Complexity of work – is there a requirement for this role to make complex decisions, deal with multiple stakeholders, produce or hold essential information and/or have responsibility over financial resources?
• Physical effort – is there a requirement for this role to engage in tasks that lead to physical tiredness beyond what everyone experiences through ‘normal’ working? For example, does it require any lengthy periods of standing and walking, working in awkward positions, maintaining a particularly high sustained pace of work, or heavy lifting?
• Working conditions – is there a requirement for this role to be exposed to stressful situations, abuse from people, extreme weather, noise and/or fumes, which are unavoidable, assuming all health and safety precautions are in place?

Considering all the requirements above, group the roles in your business into those that have the most aligned requirements. These groups can become your pay levels. Most small businesses will have 3–6 levels. Larger organisations are likely to have more.

The process relies on your own judgement as the business owner or person responsible for pay equality in the organisation. Don’t forget to consider the risk that bias may inform the assessments made. To mitigate this, it is a good idea to collaborate with another person in the assessment to help check any biases and get the most fair and equitable outcomes.

You can use the first sheet of the pay gap calculator – ‘1. Comparable work’ – to guide you through this process.

Gather the following data from your payroll and personnel records for each employee. It is a good idea to use the data from the last financial year.

Role-specific data:

• pay level (from the previous step)
• employment type – full-time, part-time or casual
• qualifications – the highest level of qualification the employee has obtained (if applicable)
• experience – the number of years of experience the employee has achieved (if applicable

Remuneration data:

• base salary – the annual base salary the employee received last financial year (excluding superannuation, leave, bonuses and entitlements).
• superannuation – the amount of superannuation the employee received over the year
• benefits – the monetary value of benefits the employee received over the year (this may include items such as stock options, gym membership, etc.)
• leave – the monetary value of any additional leave over the year
• allowances – the monetary value of any allowances received over the year (this may include car/travel allowances, clothing allowance, etc.)
• bonuses – the monetary value of all bonuses the employee received over the year (this may include Christmas cash bonus, gift cards, milestone bonuses)

Demographic data:

• gender – identifying employees’ gender will help you determine whether a pay gap could be due to gender biases in your organisation
• age – identifying employees’ age groups will help you determine whether a pay gap could be due to age biases in your organisation
• cultural background – identifying employees’ racial background will help you determine whether a pay gap could be due to racial biases in your organisation
• disability – identifying employees with disability will help you determine whether a pay gap could be due to disability biases in your organisation

You can use the second sheet of the pay gap calculator – ‘2. Pay data’ – to guide you through this process.

Consider each pay level of your data separately. This will allow you to compare remuneration among roles of like work. Use this data to answer the following questions to discover pay inequalities.

You can use the pay audit analysis guide to step you through this process.

Consider the following:

• Are men, women and gender-diverse people receiving the same base salary in each level?
• Are men, women and gender-diverse people receiving the same total remuneration in each level?
• Is there a gender difference between the number of people in each level?
• Is there a gender difference between the employment types at each level?

In 2023, the Commission For Gender Equality in the Public Sector released a report Intersectionality at Work. While this report details an analysis of the public sector workforce, it highlights how experiences of disadvantage and discrimination based on intersectional attributes might compound or shape experiences of pay inequality. Consider the following to analyse pay equality through an intersectional lens:

• Are people of different ages being paid equally?
• Are people with different cultural backgrounds being paid equally in each level?
• Are people with differing abilities being paid equally?

It is important to note that this step requires an examination of the data without judgement.

Examples of possible answers might be:

Question	Your answer
Are men, women and gender diverse people receiving the same base salary in each level?	Men are receiving a higher base salary at levels 1 and 2. There is no gendered difference in base salaries in other levels.
Are men, women and gender diverse people receiving the same total remuneration in each level?	Women and gender diverse people receive similar base salaries at levels 1 and 2, but less total remuneration.
Are people with different backgrounds being paid equally in each level?	Employees from multicultural backgrounds receive a lower total remuneration at levels 3 and 4.
Are people with differing abilities being paid equally?	Employees with a disability receive lower total remuneration at level 3.

For each answer to the questions above, provide possible explanations – these may come from considering other elements of the data or from other parts of your business plan/strategy. It might be useful to do this with others in your organisation.

You can use the pay audit analysis guide to guide you through this process.

Examples of possible explanations may be:

Answer	Possible explanation
Men are receiving a higher base salary at levels 1 and 2. There is no gendered difference in base salaries in other levels.	There are more men than women and gender diverse people in these pay levels. These levels contain the more senior roles in the organisation.
Women and gender-diverse people receive similar base salaries at levels 1 and 2, but less total remuneration.	Most women and gender-diverse people at pay levels 1 and 2 have not negotiated bonuses. Some women in these levels work part-time to accommodate caring responsibilities. Some women and gender-diverse people in these levels had parental leave.
Employees from multicultural backgrounds receive a lower total remuneration at levels 3 and 4.	A high percentage of the workforce at levels 3 and 4 are from migrant populations and are mostly in part-time or casual roles. These workers are not paid at award rates.
Employees with a disability receive lower total remuneration at level 3.	Employees with disability are in part-time roles. Employees with disability in these roles have limited qualifications.

Identify what you could change in your business to address the inequalities you have found in your pay audit. Consider what other information you, or your workforce, might need to help you make the changes. These can become priorities for your action plan <link to action planning tool>.

Below are examples of changes that could be made to address the pay inequalities identified in the audit:

Possible explanation	Changes to action
There are more men than women and gender-diverse people in these pay levels. These levels contain the more senior roles in the organisation.	Review hiring process for senior management roles to attract more applications from women.
Most women and gender-diverse people at pay levels 1 and 2 have not negotiated bonuses. Some women in these levels work part-time to accommodate caring responsibilities. Some women and gender-diverse people in these levels had parental leave.	Review process for bonuses to ensure fairness across all levels of the business. Look at rates of part-time work at all pay levels to ensure they are FTE. Ensure parental leave policy includes actions to ensure those taking parental leave do not miss out on promotions.
A high percentage of the workforce at levels 3 and 4 are from migrant populations and are mostly in part-time or casual roles. Some of these workers are paid under award rates.	Review award rates across the business.
Employees with disability are in part-time roles. Employees with disability in these roles have limited qualifications.	Look at rates of part-time work at all pay levels to ensure they are FTE. Add professional development to performance reviews to increase opportunities for higher qualifications.