eowa payroll analysis a 7 step approach

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EOWA Pay Equity Tool

Payroll Analysis:A 7Step Approach


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Acknowledgement

EOWA would like to acknowledge the

assistance of Tim Sowerbutts, Q SocialResearch Consultants, who designed themethodology for the payroll analysis.

To be read in conjunction with:

Payroll Analysis: Excel Analysis Workbook

Payroll Analysis: Excel Analysis Instructions

The EOWA Pay Equity Tool
http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Instructions.rtfhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/index.htmhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Instructions.rtfhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/index.htmhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/index.htmhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xls


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Contents

Introduction .............................................................................

Step 1: Define Scope of the Analysis ............................................

Step 2: Choose Reference Time Period .........................................

Step 3: Choose Remuneration Components ..................................

Step 4: Choose Explanatory Variables ..........................................

Step 5: Build Dataset ................................................................

Step 6: Analysis .......................................................................

Step 7: Interpret the Analysis and Take Action ..............................

Appendix 1: Example of Input and Output Tables ..........................

Appendix 2: ABS Definitions .......................................................


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IntroductionProject Rationale

Recent surveys by the Australian Bureau of Statistics have shown that averagefemale full-time wages are about 84% of male average wages, and total female

earnings are about 66% of male earnings. The main reason for this is the unevendistribution of the workforce, in which more men occupy well-paid jobs than

women and more women work part-time or casually.

However, there can be some cases ofdirectdiscrimination where men andwomen do comparable jobs but are paid differently. These instructions forconducting a payroll analysis are intended to assist employers to:

Identify and explore differences in men and womens average pay based on

non-relevant criteria,

Discover whether there are any pockets of direct discrimination in yourorganisation,

Determine whether overall gender pay differences are due to an unevendistribution of women in the organisation,

Identify areas of best practice where there is no pay equity problem, and

Monitor the pay distribution of the workforce to see if changes are occurringover time.

Carrying out this pay equity analysis demonstrates a commitment to best practice

EEO management.

Overview of the Analysis Method

Conducting a payroll analysis involves analysing the pay differences between

groups of employees that are nominally equal.

The proposed method of analysis is to calculate the overall average pay differencebetween a group of male and female employees, and then look to see to whatextent these differences can be explained by factors such as grade of employee,section of the organisation, full-time or part-time status, etc.

Appendix 1 gives an example of the typical input data required for the payrollanalysis, as well as an example of the output, or analysis table.

Terminology

The term remuneration will be used rather than pay, wages or earnings since

the full range of methods of rewarding employees is the major concern. Paymentsin kind and indirect benefits are frequently used in the private sector so a term

is needed that will include all forms of an employee's financial rewards.

Software Implementation

This specification is designed to be used with the associated Microsoft Excelspreadsheets. This Excel system is a model of how to perform the suggested

EOWA Pay Equity Tool Page 4 Payroll Analysis: A 7Step Approach


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analyses. Given the diversity of situations it may be applied to, the actual

implementation may vary from that in the model. The end user will beresponsible for the accuracy of the data used and its manipulation.

Confidentiality of the Data

Microsoft Excel has been chosen as the analysis platform partly because it isavailable to HR staff and hence these analyses can be done internally to the HRunit without the need to involve staff from other sections. By doing the analysisthemselves, the HR staff will have control of access to this confidential data.

The 7 Steps

The process is organised into 7 steps. Each of these is described in detail in thefollowing sections. The steps are:

1 Define scope of the analysis, ie, which employees / business unitswill be included

2 Choose reference time period

3 Select remuneration components4 Select explanatory variables

5 Build dataset6 Undertake analysis7 Interpret analysis and take action

Implementation Plan

This guide explains the 7 steps to be undertaken to perform a payroll analysis. In

conjunction with the downloadable Excel spreadsheet, it will enable suitableanalysis to be undertaken.

The most important step is the last: interpreting the analysis and then taking the

appropriate action.

Support and Assistance

Statistical analysis is as much an art as a science. Exactly which analyses are

most appropriate is a balance of competing interests. For some situations a shortreference period may be preferable, for others a long one. The choice of exactly

which version of remuneration to analyse can also be subject to opinion.

Training and support may be needed with setting up each analysis as well as withthe interpretation of the results. If this is required, EOWA can offer generalassistance over the phone and more in-depth tailored advice and support on afee-for-service basis.



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Step 1Define Scope of the

AnalysisThe first step is to define the scope of the analysis. Is it for one section of anorganisation or the entire organisation? This can be a major issue for

organisations whose structure has recently changed due to mergers oracquisitions.

Apart from deciding which business units to include, it will be necessary to decidewhich class of workers are to be included. Typically it will be employees butthere may be situations where on-going contractors may warrant inclusion aswell.

For complex organisations, this step can be a challenge but there are twoprinciples that will help make this decision.

First, the analysis will be based on the employees you have decided to include.

Hence it is important that the audience for this analysis is considered so that youcan address those peoples interests and responsibilities. For example, it may bedesirable to do separate analyses for different business units, such themanufacturing operation versus head-office management.

Second, from a practical viewpoint, it may be a very complex process to combine

data from different payroll systems. In many cases, the most practical choice is tochoose all the employees who are paid via one payroll system where it is

assumed that that system is consistent across all employees. For example, if caruse is recorded in one business unit, it is consistently recorded for all business

units.

Both of these principles can be overridden. With some additional effort and skill indata manipulation, it is possible both to aggregate data from many analyses intoa combined analysis and also to perform analyses of sub-groups of the data.However, the aim of this method is to provide a tool that can be used by a broadrange of non-specialist data analysts. For organisations with access to higher-level skills, other approaches maybe more appropriate.



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Step 2Choose Reference Time

PeriodHaving chosen which employees will be included in the analysis, the next step isto decide which time period will be used.

For a workforce that has very few periodic payments, such as performancebonuses or variable wage components such as shift allowances, it may bedesirable to use a typical pay period of a week or a month.

Alternatively, for those situations where there are many variations in a personsremuneration over time, taking a longer period will provide a more usefulanalysis. Typically, one might choose a 12-month period, often the financial year,

since that longer period will include a full range of periodic options such as yearlybonuses. An additional benefit is that data for that period may already have been

collated. The longer period will also allow a better coverage of casual employees.

In the section below on analysis options we will explain why the down-side oflonger time periods is that, over time, other variables may change (eg, employeegrade, section, qualifications). This will affect the analysis of the data, however inthe context of private employers the choice of a longer reference period isprobably the more desirable due to the prevalence of a range of irregularremuneration options.

The Australian Bureau of Statistics conducts a number of remuneration surveys.

These ABS surveys use a short period for data collections where the focus is onsimple wage components. For surveys such as the Labour Costs Survey, where a

larger range of remuneration options is included, the period is a year. For thatsurvey, their publication 6102.0 Labour Statistics: Concepts, Sources and

Methods explains this as follows:

11.16 Compensation of employees should be measured on an accrualbasis under which the total cost of employee compensation is reflected inthe period during which the employee provided services to the employer.This requires that wages and salaries be accrued on the basis of the time

worked.



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Step 3Choose the Remuneration

ComponentsIn order to define which components of remuneration are to be included, we havebased our recommendation on the approach used by the ABS in Chapter 11 of the

publication 6102.0 Labour Statistics: Concepts, Sources and Methods.1Appendix2 contains references and more detail on the technical specifications for theseterms.

We recommend using the ABS definition of Remuneration, ie, the totalremuneration, in cash or in kind, payable by an enterprise to an employee inreturn for work done by the latter during the accounting period (SNA93 7.21)rather than just the earnings, which exclude employers payments for pension

and other social security schemes as well as severance/termination pay. Thebasis for this recommendation is that pay inequities may exist in these implicit

areas as well as the more explicit ones.

The following table summarises the components which should be included in thecalculation of Employee Compensation.

Concept Component Definition/NotesRemuneration fortime worked or

work done

Ordinary time earnings Salary and wages paid forwork done in normal hours.

Over-timePenalty paymentsCommissions

Taxable allowances, eg, shift,dirt, height

For work performed.

Other taxable allowances Only include these where

there is benefit to theemployee, possibly as defined

by the FBT rules. Otherpayments such as

housing/rent would normallynot be included since they are

compensation for someinconvenience.Incentive/piecework Include Short-Term

Incentives. Long-TermIncentives are mainly only for

upper management and maybe hard to measureconsistently.

Remuneration fortime NOT worked or

work done

Paid leave

Workers compensation

1 See

http://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fa

c88!OpenDocument

http://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocument


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Bonuses andgratuities

Regular bonuses On a regular cycle paid moreoften than annually.

Regular profit-sharing

payments

Irregular payments Annual and irregular bonusesPay in advance For periods that falls withinthe reference period.

Severance As above.Redundancy As above

Leave loadings As above (eg, people can gettheir entire annual leaveloading in one hit if they

havent taken leave for ayear).

Retrospective pay As above.Fees Fees: directors Only if part of the

employment contract, whichit usually is not. May not be

relevant for most staff.Fees Fees: office holders May not be appropriate for

most staff.

Superannuation Super: employer contributionPayments in kind Holiday trips, reward

conferences

Salary sacrifice Super: self contribution Can be regarded as apayment in kind, howeveravoid counting twice: salaryOR super; count the tax

benefit in addition.Car lease/parking Deal with as would in a FBT

context.Childcare Free? Discounted? Tax benefit

if salary sacrificed?

PC and other office equipment As above. The proportionused for personal use plus thetax benefit (as in an FBTcontext).

Etc.Others Health Inclusion should be

considered carefully.

Travel allowance / living awayfrom home allowance

Possible include in taxableallowance.

Important: To accurately calculate employees total remuneration, all relevant

components of their pay and benefits must be included.

For example, if an employee has a newer or more expensive model of companycar than their colleagues, this should be reflected in the calculation of their totalremuneration.



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The ABS notes that payments in kind (including salary packaging/sacrifice) havetraditionally been excluded from ABS earnings measures for practical reasons,information on such payments not being readily available from payrolls. Given

the increasing sophistication of payroll packages, you should try to include thesepayments in the analysis.

Some of these payments in kind may need to have values imputed based onmarket rates for comparable services.

We note that some such components are only available to some employees, eg,

childcare. These components could however represent significant value to theemployee and hence we believe should be analysed. In a later section we discusswhy it might be desirable to have a series of analyses with different versions ofthe compensation variable, for instance with and without these optionalcomponents.



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Step 4Choose Explanatory

VariablesThe previous step described how to choose the components that make up theemployee's remuneration. The analysis will also need to explore the extent to

which sex-based differences in an employee's remuneration are explained byother factors.

Explanatory factors may include:

Grade

Section/business unit

Full-time/part-time/casual

Status, i.e. employee or contractor/permanent or temporary Occupation type (ASCO)

Experience (this can be very difficult to adequately measure)

Qualifications

This step will involve deciding which explanatory factors should be included in theanalysis. In almost all cases some version of grade will be an obvious candidate,

as will section/business unit. Even though in the next step we will explain how tocalculate the full-time equivalent of an employee's remuneration, it may be worth

investigating the effect of being a part-time versus full-time worker.

Occupational classification may be available, possibly coded using the ASCO2

system. Capturing adequate information about an employees experience andqualifications can be very complex, but if it were available it could add animportant dimension to the analysis.

For long reference periods, for example 12 months, an employees status on anyof these variables could vary. It then becomes a matter of judgment as towhether to take the initial, final or most common value. If the workforce is so

volatile that it would be misleading to use just one value, it may be worthconsidering using a shorter period over which these variables would not vary as

much. There is a downside of this as previously discussed, viz the shorter periodmay not capture all the additional payments such as performance bonuses.

Chapter 4 of the previously mentioned ABS document, 6102.0 Labour Statistics:Concepts, Sources and Methods, gives a comprehensive and detailed discussionof how these explanatory factors are defined.

2For a definition of the ASCO classification, seehttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5c244fd9d252cfc8ca25697e00184d35!OpenDocument

http://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5c244fd9d252cfc8ca25697e00184d35!OpenDocumenthttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5c244fd9d252cfc8ca25697e00184d35!OpenDocumenthttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5c244fd9d252cfc8ca25697e00184d35!OpenDocumenthttp://www.abs.gov.au/ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5c244fd9d252cfc8ca25697e00184d35!OpenDocument


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Step 5Build Dataset

Having decided which employees to include, which reference period to use andwhich remuneration components and explanatory factors to incorporate, the nextstep is to build the dataset. This can be done in any format or application that isavailable since it is very likely that the results can be exported to the Excelanalysis worksheet.

The principal task is to calculate employees full-time equivalent (FTE)remuneration for the reference period. This will mean converting the

remuneration for part-time and casual employees into full-time equivalentfigures, so that these staff can be compared on an equal footing with other staff.

The FTE calculation should take into account the hours worked, as well as thenumber of pay periods worked in the reference period. It is important that all payvariables included in the analysis are consistent for all employees. If thereference period is 52 weeks, then the total remuneration for all employees,including part-time and casual workers, must be calculated for this period of time.

For example, if a casual worker was employed full-time for 12 weeks, their annual

remuneration would be calculated by dividing their total remuneration by 12, andthen multiplying by 52. Similarly, if a part-time employee worked three days a

week, or 0.6 of a full-time position, then you could calculate their full-timeearnings by dividing their total remuneration by six, and then multiplying by ten.

These calculations are probably quite familiar to payroll processing staff, althoughthe particular wage components may vary slightly from other similar tasks.

The aim of this step is to create a consistent data set that will align with the datainput page in the Excel Analysis Workbook. The column headings should follow a

similar pattern to that in the example version.

This process can be quite resource intensive so it is critical that careful thought isgiven to the preceding steps so that the process does not have to be revisedmany times.

The final dataset should contain the following fields:

Essential

ID/sequence number Full-time equivalent employee remuneration for the period

Sex coded as M or F

Status: coded as FT, PT or Casual

Section code and Section description

Grade code and Grade description

Optional

Occupation Code (ASCO 2 digit)

Age in years

Qualification code (to be defined)

Experience Code (to be defined)

Having both a code and a description for Section and Grade will enable the

http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xls


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analyses to be presented either in a full descriptive style or a very compact style.



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Step 6Analysis

Once you have built your dataset, the next step is to copy this data into the pre-prepared data table in the accompanying Excel Analysis Workbook. This willenable you to analyse the results using the pivot tables on the adjacentworksheets. For information on how to do this, see the Excel AnalysisInstructions.

However, the Excel approach is just one way to do this analysis. There are manyalternative software approaches such as database tools and statistical analysis

packages that can perform these tasks. Excel has been chosen because it is apowerful tool that has the capacity to do this and most importantly is so widely

available that almost everyone has access to it. The more sophisticated databaseand statistical tools are not typically available to HR staff.

The system provided here has been tested with relatively large datasets, eg,30,000 records, and performs well.

The essential analysis tool used is the Pivot Table. The Excel Analysis Workbookhas previously set up pivot tables and these can be modified to suit particular

situations. For users who are unfamiliar with pivot tables, there are helpfulreferences, as well as a number of useful teaching aids, in Excels Help system.

Excel also supports a drill down function which is accessed by double-clicking ona cell in the table. This makes it possible to see exactly which records contributeto the results in a particular cell in the analysis table.

The pivot tables are set up to analyse the column called Remuneration. Therecan be many versions of this such as:

(a)Ordinary time earnings(b)Ordinary time + shift allowance earnings

(c)All earnings + non-cash benefits(d)Wage + non-cash + imputed benefits

The choice of which version of Remuneration will depend on the circumstancesand local priorities.

The example Excel pivot tables show an analysis of Pay equity, ie. female

average remuneration as a percentage of male average remuneration, cross-cutby Section and by Grade. This analysis shows the degree to which Section andGrade explain the differences in Pay Equity. The model could be used to do

similar analyses, eg, Age group by Grade.

Ensuring the Accuracy of Your Analysis

The interpretation of these rich analysis tables can depend on quite subtle

variables. If your staff have not yet had much experience in this type of work, itmight be useful to seek help from colleagues, academics or external consultants.

One of the fundamental issues to be considered when interpreting these tables is

the cell size. If there are less than 20 employees in a cell, the gender differencesshould be treated with caution. This will be a particularly important issue for small

http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Instructions.rtfhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Instructions.rtfhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Instructions.rtfhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Instructions.rtfhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xls


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organisations with less than 400 employees, since given the uneven spread over

the cells there could well be many cells with very small numbers. The analysispivot tables have been set up to show the cell size so that this issue is easy toidentify.

Because remuneration is primarily dependent on employee grade (or some similarconcept) the typical analysis will take the form of a table where the columns areGrade and the rows are another possible explanatory factor, eg, section, age,experience, status, etc. There could be a number of versions of the analysis with

different explanatory factors.

Given the crucial role of grade, it is clear that the classification codes used for thisfactor are very important. If there are too few codes (say only 3) it is unlikely theanalysis will reveal the fine details that are needed.

Important points to note:

(a)Without adequately investigating the results of the analysis andwhy they appear as they do, it will not be possible to determineaccurately whether pay equity is an issue in your workplace.

(b)The usefulness of the data interpretation is determined by thenature of the design choices taken in the previous steps, eg, in

determining grade. If these are too broad then the results will notbe useful.

(c)This process of analysing payroll data is often iterative. Havinginterpreted a set of analyses, other ideas for analysis become

apparent. For example, having analysed your data by grade, youmay then cut the results by business unit to reveal a further level

of pay distinction.

(d)The EOWA payroll analysis approach is designed to provide

actionable research findings. These analyses are not an end inthemselves. See the next section on interpreting the results of your

analysis. The most difficult part of this work is finding a way to usethese findings to inform better remuneration practices.

Once you are confident that your figures accurately portray the gender paydistribution in your organisation, you can begin to analyse whether pay inequitiesexist.



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Step 7Interpret the Analysis and

Take ActionThe final step of the payroll analysis is to interpret what the results say about thegender pay distribution in your organisation and then, depending on what you

find, determine an appropriate course of action.

Interpreting the Results

Your payroll analysis results may reflect one or more of the scenarios outlined

below. For examples of what each scenario would look like if it were reflected inthe results of your pivot table analysis, see the accompanying Excel AnalysisWorkbook.

1 Equal Pay

In this scenario, there are no gender-related pay differences, and that

female total average remuneration is the same as male total averageremuneration irrespective of factors such as grade, occupation and

employment status.

If your analysis supports this scenario, congratulations your organisationis providing equal remuneration outcomes for its employees.

ResourcesTo find out more about how your organisation can continue to provideequal remuneration and address other equal opportunity issues for womenin the workplace, review the other modules of the EOWA Pay Equity Tooland visit the EOWA website at www.eowa.gov.au.

2 Pay Discrimination

In this scenario, men and women in equivalent jobs and with the samerelevant job criteria (such as grade and qualifications) are paid differently.This may indicate direct discrimination if no valid reason can be found toexplain the pay difference other than gender, and should be investigatedas a matter of urgency.

Resources

To find out more about the factors that may give rise to unequal pay and

your obligations as an employer, see the following web resources:

o EOWA Pay Equity Tool About Pay Equity

o EOWA Pay Equity Tool Case Law

o EOWA Pay Equity Tool Business Case

o HREOC Equal Pay Handbook

http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/index.htmhttp://www.eowa.gov.au/http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/case_law/introduction.htmhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/business_case/why_is_pay_equity_important.htmhttp://www.hreoc.gov.au/sex_discrimination/workplace/equal_pay.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/_docs/EOWA_Payroll_Analysis_Excel_Analysis_Workbook.xlshttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/index.htmhttp://www.eowa.gov.au/http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/case_law/introduction.htmhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/business_case/why_is_pay_equity_important.htmhttp://www.hreoc.gov.au/sex_discrimination/workplace/equal_pay.html


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3 Classification or Grade-based Pay InequityIn this scenario, womens total remuneration is less on average thanmens because they are employed predominantly in lower-grade, lower-

paid positions within the organisation. This may indicate that womenemployees do not have equal access to the promotional, development ormentoring opportunities necessary to advance vertically in theorganisation into more senior and higher-paid roles.

Resources

To find out more about the indirect, classification-related causes of pay

inequity and the actions employers can take to address these, see thefollowing EOWA web resources:


o EOWA Women in Management Tools

o EOWA Employment Matter 2 Kit: Promotion, Transfer &Termination

o EOWA Employment Matter 3 Kit: Training & Development

o EOWA Workplace Analysis Toolkit

o EOWA Employment Matter 2 Resources: Promotion, Transfer &

Termination

o EOWA Employment Matter 3 Resources: Training &

Developmento EOWA Workshop 4a: How to Get More Women into Management

4 Occupation-based Pay Inequity

In this scenario, women earn less than men on average because they arepredominantly employed in support services and other non-core business

sections, such as HR, finance and communications, which are remuneratedless highly than the core, line and profit-and-loss business units which

may employ predominantly men. This scenario may arise if women do nothave the same access as men to the recruitment, transfer, training anddevelopment opportunities needed to move horizontally into all areas ofthe organisation, including those that attract the highest remuneration.

Resources

To find out more about the indirect, occupation-related causes of pay

inequity and the actions employers can take to address these, see thefollowing EOWA web resources:


o EOWA Employment Matter 2 Kit: Promotion, Transfer &

Termination

o EOWA Employment Matter 3 Kit: Training & Development

o EOWA Women in Management Tools

o EOWA Employment Matter 2 Resources: Promotion, Transfer &

Termination

o EOWA Employment Matter 3 Resources: Training &

Developmento EOWA Workplace Analysis Toolkit

http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_4/Women_in_Management_Tools.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Training_and_Development.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_1/Workplace_Analysis_Toolkit.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Training_and_Development.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_4/Women_in_Management_Tools.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_1/Workplace_Analysis_Toolkit.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_4/Women_in_Management_Tools.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Training_and_Development.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_1/Workplace_Analysis_Toolkit.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Promotions_Transfers_and_Terminations.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Training_and_Development.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_4/Women_in_Management_Tools.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_2_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_3_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_1/Workplace_Analysis_Toolkit.asp


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o EOWA Workshop 4b: How to Get More Women into Non Traditional

Employment

http://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asphttp://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asphttp://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asphttp://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asphttp://www.eowa.gov.au/Consultancy_And_Workshops/Current_Workshops/Workshop_4.asp


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5 Workforce Participation-Based Pay Inequity

In this scenario, womens total average remuneration is less than mensdue to the employment of a large proportion of the female workforce in

casual or part-time positions. This may indicate that inflexible workstructures within the organisation, and/or the need to accommodateexternal care commitments, is preventing more women than men fromaccessing opportunities to higher-paid and more senior roles or roles inparticular job categories. It may be that the organisation needs to focus

on ensuring opportunities for all employees regardless of their workarrangements.

Resources

To find out more about the indirect, workforce participation-related causesof pay inequity and the actions employers can take to address these, seethe following EOWA web resources:


o EOWA Key Agenda Item: Work-Life balance

o EOWA Key Agenda Item: Inequities in Workforce Participation

o EOWA Consultation Tools

o EOWA Employment Matter 4 Kit: Work Organisation

o EOWA Employment Matter 5 Kit: Conditions of Service

o EOWA Employment Matter 4 Resources: Work Organisation

o EOWA Employment Matter 5 Resources: Conditions of Service

o EOWA Employment Matter Solutions: Work Organisation

Take Action

If the payroll analysis indicates that pay equity issues exist, the organisation willneed to decide what action it will take.

A well-established business case exists for taking action to address direct payinequities, including to avoid the risk of litigation and potentially costly legal feesshould a pay discrimination compliant be made.

The first step is to identify possible solutions. This is likely to include modifyingthose rules or practices that were identified as giving rise to pay discrimination. It

is also important to ensure that these solutions do not create differentdiscrimination problems. Employers should analyse the likely effectsof the proposed changes before implementing them.

To develop fair, effective and sustainable solutions to pay inequalities, employersshould:

Consult widely with the workforce and representatives about preferred

solutions.

Negotiate agreement from key players for implementation of solutions.

Develop a plan for implementing equal remuneration.

Ensure that the new procedures are transparent. Establish a mechanism to monitor pay practices to ensure that the system

remains non-discriminatory and is implemented by all parties in a non-

http://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/About_Equal_Opportunity/Key_Agenda_Items/Work_Life_Balance.asphttp://www.eowa.gov.au/About_Equal_Opportunity/Key_Agenda_Items/Inequities_in_Workforce_Participation.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/Consultation_Tools.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Work_Organisation.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Conditions_of_Service.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_4_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_5_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Solutions/Work_Organisation.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/business_case/why_is_pay_equity_important.htmhttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/about_pay_equity/what_is_the_meaning_of_pay_equity.htmlhttp://www.eowa.gov.au/About_Equal_Opportunity/Key_Agenda_Items/Work_Life_Balance.asphttp://www.eowa.gov.au/About_Equal_Opportunity/Key_Agenda_Items/Inequities_in_Workforce_Participation.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/Consultation_Tools.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Work_Organisation.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Kits/Conditions_of_Service.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_4_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Resources/EM_5_Resources.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Employment_Matter_Solutions/Work_Organisation.asphttp://www.eowa.gov.au/Developing_a_Workplace_Program/Six_Steps_to_a_Workplace_Program/Step_2/_Pay_Equity_Tool/business_case/why_is_pay_equity_important.htm


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discriminatory manner.3

3 For more information on anti-discrimination legislation in relation to pay equity,

see the HREOC Equal Pay Handbook.

http://www.hreoc.gov.au/sex_discrimination/workplace/equal_pay.htmlhttp://www.hreoc.gov.au/sex_discrimination/workplace/equal_pay.html


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Appendix 1: Example of Input and

Output TablesThe data available for these analyses is typically extracted from the payrollsystem in a form similar to Table 1. The process described in this report willtransform these data into analyses such as that produced in Table 2.

Table 2 Input Example

ID Sex Grade SectionAnnualised

Remuneration

191 M 4 8 $91,206.02

957 M 3 3 $72,814.56

1449 M 4 8 $91,206.021538 M 2 9 $61,421.36

1724 M 3 9 $71,540.56

3689 M 3 4 $74,428.90

4855 M 3 9 $76,614.72

5010 M 3 9 $77,561.12

7358 F 2 13 $61,423.30

8516 F 4 4 $86,173.36

9024 F 3 4 $66,116.96

11622 M 2 9 $61,421.36

etc

Table 2 Output Example

Section Gender Grade Grand Total

1 2 3 4

Marketing F Avg. remun. $ 42,959 $ 55,459 $ 72,376 $ 95,810 $ 69,377

No.employees

5 6 19 6 36

M Avg. remun. $ 44,312 $ 60,002 $ 72,586 $ 98,117 $ 77,223

No.

employees7 14 29 29 79

Recreation F Avg. remun.

No.employees

0

M Avg. remun. $ 46,068 $ 58,440 $ 72,308 $ 102,857 $ 74,689

No.employees

1 4 8 4 17

Other F Avg. remun. $ 46,068 $ 59,435 $ 69,551 $ 86,173 $ 63,932

No.employees

2 2 4 1 9

M Avg. remun. $ 71,541 $ 103,262 $ 99,297

No.employees

1 7 8



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Head Office F Avg. remun. $ 46,068 $ 70,274 $ 97,226 $ 76,213

No.

employees1 2 2 5

M Avg. remun. $ 83,484 $ 90,250 $ 86,867

No.employees

1 1 2

Hardwaresales

F Avg. remun. $ 41,369 $ 58,241 $ 70,093 $ 86,177 $ 59,830

No.employees

6 5 9 1 21

M Avg. remun. $ 39,802 $ 57,446 $ 71,105 $ 105,590 $ 84,405

No.employees

3 2 5 12 22

Software

development

F Avg. remun. $ 46,068 $ 57,446 $ 71,541 $ 134,774 $ 88,921

No.employees

1 1 1 2 5

M Avg. remun. $ 57,446 $ 73,523 $ 108,570 $ 92,944

No.employees

1 3 6 10

Sales F Avg. remun. $ 46,068 $ 61,421 $ 68,829 $ 61,314

No.employees

1 2 2 5

M Avg. remun. $ 55,459 $ 78,097 $ 118,331 $ 92,269

No.employees

2 4 5 11

Field

operations

F Avg. remun. $ 39,924 $ 95,293 $ 67,608

No.

employees1 1 2

M Avg. remun. $ 66,117 $ 96,893 $ 86,634

No.

employees1 2 3

Legal F Avg. remun.

No.employees

0

M Avg. remun. $ 42,996 $ 61,421 $ 68,829 $ 53,009

No.

employees4 1 2 7

Total Average Remuneration

$ 43,154 $ 58,724 $ 72,206 $ 102,283 $ 75,899

Total Number of employees 32 41 90 79 242



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Appendix 2: ABS DefinitionsThe ABS website contains a wealth of relevant material for conducting a payroll

analysis. Of particular interest is the publication 6102.0 Labour Statistics:Concepts, Sources and Methods which can be found at the following webaddress:

http://www.abs.gov.au/Ausstats/abs%40.nsf/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocument

The most relevant chapters for this project are:

Chapter 4. Employment Measures and Classifications

Chapter 11: Earnings, Employee Compensation, Labour Costs and Related

Statistics

Chapter 11 explains the difference between Compensation of employees rather

than the narrower definition of Employee Earnings in the following terms:

COMPENSATION OF EMPLOYEES11.13 Compensation of employees, a measure used in the United NationsSystem of National Accounts 1993, is viewed in terms of employers'expenditure for, or on behalf of, their employees. It is defined as the totalremuneration, in cash or in kind, payable by an enterprise to an employeein return for work done by the latter during the accounting period (SNA93

paragraph 7.21).

11.14 Compensation of employees excludes taxes, such as payroll tax,paid by employers on their wage and salary bill, but includes contributions

(both actual and imputed) payable by employers in order to obtain socialbenefits for their employees. Actual social contributions consist of thosecontributions payable by employers to social security funds, pension funds,insurance enterprises or other organisations which administer and managesocial insurance schemes. Employers' social contributions are imputed insituations where employers make payments for social benefits directly to

their employees, former employees or dependants out of their ownresources without involving an insurance enterprise or autonomous

pension fund and without creating a special fund or reserve for thispurpose.

11.15 'Compensation of employees' produces a broader measure than'employee earnings', as it includes: all irregular remuneration such asirregular bonuses, ad hoc bonuses and exceptional payments; severanceand termination payments; all wages and salaries in kind in the form ofconsumption goods and services produced or purchased by employers andprovided free of charge or at reduced prices to their employees (includingwelfare services); and employers' actual and imputed social contributions.

DEFINITION OF EARNINGS (ICLS 1973)The concept of earnings, as applied in wages statistics, relates to

remuneration and payments in kind paid to employees, as a rule at regularintervals, for time worked or work done, together with remuneration for

http://www.abs.gov.au/Ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/Ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/Ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/Ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/Ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocumenthttp://www.abs.gov.au/Ausstats/[email protected]/66f306f503e529a5ca25697e0017661f/5b9125c8e59590c1ca256a4d001fac88!OpenDocument


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time not worked such as for annual vacation, other paid leave or holidays.

Earnings exclude employers' contributions paid, in respect of theiremployees, to social security and pension schemes and also the benefitsreceived by employees under these schemes. Earnings also exclude

severance and termination pay.

The document also includes the following useful graphical representation of thedifferent measure of employee wage measures.



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About EOWA

An Australian Government agency, the

Equal Opportunity for Women in theWorkplace Agency (EOWA) communicates

with over 2,700 Australian employersannually regarding their equal opportunity

initiatives. EOWAs vision is to create anAustralia where women in the workplace

can achieve their greatest potential. Inaddition to annual reporting, EOWA

inspires companies to advance women intheir workplace through various programs.

These include the EOWA BusinessAchievement Awards, the EOWA Employer

of Choice for Women citation, awarded toorganisations that demonstrate equal

opportunity effectiveness for women, and

the EOWA Australian Women in LeadershipCensus. www.eowa.gov.au

Commonwealth of Australia 2005
http://www.eowa.gov.au/http://www.eowa.gov.au/

eowa payroll analysis a 7 step approach

Documents