Pay Equity Ratio
Ratio comparing compensation of different demographic groups for equivalent roles, measuring internal pay fairness
What is Pay Equity Ratio?
Pay equity ratio compares the average pay of one group with that of a reference group in equivalent roles and levels. It shows whether people doing comparable work are paid comparably.
It helps organisations find and fix unjustified pay differences, and it supports fairness and legal compliance.
How this KPI is measured
- Function
- Human Resources
- Sub-function
- Compensation & Benefits
- Industry
- All Industries
- Type
- Lagging
- Impact
- People
- Unit
- x
- Measurement frequency
- Annual
- Formula
- Average pay of target group / Average pay of reference group for equivalent roles and levels
How to calculate it
Divide the average pay of the target group by the average pay of the reference group for equivalent roles and levels.
For example, if the target group earns an average of 47,500 and the reference group earns 50,000 in equivalent roles, the ratio is 0.95.
A ratio of 1.0 means parity. Compare like with like by role, level and location, and consider using statistical analysis to account for legitimate factors.
Where it is used
Finding pay gaps
See where differences exist.
Correcting unfair differences
Plan adjustments.
Demonstrating fairness
Report to stakeholders.
How to improve it
Tips and common mistakes
- Equal pay and pay gap are different measures.
- Follow the law and handle data confidentially.
- Review regularly, not once.
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