Pay Equity Analysis: How To Achieve Fair Pay in Your Organisation

At HR DataHub I work with pay data every day, and pay equity is one of those topics where most organisations think they're in decent shape. The reality is usually quite a different story. According to the ONS Annual Survey of Hours and Earnings, the median UK gender pay gap across all employees still sat at 12.8% as of April 2025. That's after eight years of mandatory reporting. 

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This guide is for HR managers, reward leads, and people directors at mid-market UK organisations who want to fix pay equity, not just report on it. I'll walk through what it means in practice, how to run a proper audit, and what to do when you find problems.

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But here's the thing I want to say upfront: the process matters, but intent matters more. The organisations that get pay equity right are the ones where it's a genuine commitment from the top, not a once-a-year box-ticking exercise. If the board says "we will not accept equity issues in this organisation," everything else flows from that.

What is pay equity?

Pay equity means employees in comparable roles within the same organisation are paid fairly and consistently, with any differences in pay justified by objective, measurable factors such as performance, tenure, qualifications, or location. It applies across all protected characteristics and employment factors, not just gender.

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In practice, gender gets the attention because of mandatory reporting. But when organisations actually look at their data properly, the gaps that surprise them most are often nothing to do with protected characteristics at all. Tenure is a huge one: long-serving employees being paid less than recent hires because the market moved and nobody adjusted internally. That's a pay equity issue, and it's one of the most common I see.

Is equal pay the same as pay equity?

No, equal pay and pay equity are different concepts. Equal pay is a legal requirement under the Equality Act 2010, covering men and women doing the same work, like work, or work of equal value. Pay equity is broader. It looks at fairness across all protected characteristics and beyond: gender, ethnicity, disability, age, and factors like tenure and role level.

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Pay equality, on the other hand, is when everyone gets the same regardless of their role or contribution. That's not what we're talking about. Pay equity accepts that people can and should be paid differently. The question is whether those differences are justifiable.

How to run a pay equity analysis

A pay equity analysis is an internal exercise. You're comparing employees in like-for-like roles within your organisation, not benchmarking against external market rates. External benchmarking has its place, but that's a separate conversation. Our guide to salary benchmarking explains when you need external data and how to use it effectively.

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The goal here is simple: find out whether people doing comparable work are paid consistently, and if not, whether the differences can be justified with facts.

Step 1: Define your scope and protected characteristics

Before you touch any data, decide what you're auditing. Gender is the obvious starting point because you're already reporting on it. But a genuine pay equity audit goes further: ethnicity, disability, age, and working pattern should all be in scope if you have the data.

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You also need to decide which roles, levels, and locations to cover. My advice: do the whole organisation. Partial reviews are one of the biggest mistakes I see.

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If you only look at one department or one office, you'll miss systemic issues. Even organisations that think they're in reasonable shape are usually doing this ad hoc, firefighting complaints and attrition rather than proactively auditing.

Step 2: Collect and clean your pay data

You need base salary, total compensation (including bonuses and allowances), and the demographic data for each employee: gender, ethnicity, disability, age. Pull this from your HRIS, payroll system, or both.

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Data quality is where a lot of audits fall over before they've started. Common problems: inconsistent job titles across departments, missing demographic data (especially ethnicity, which relies on self-reporting), and employees sitting in the wrong cost centre or function. Clean the data first. If you skip this step, your analysis will be full of noise and you won't trust the results.

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One thing I'd say: a lot of organisations jump the gun and assume they've got terrible pay equity because the raw numbers look messy. Get the data clean first. You might find you can justify more of the differences than you expected.

Step 3: Group comparable roles

Pay equity is about like-for-like roles. You can't compare an HR Business Partner with an accountant. What you're looking for is people doing the same or substantially similar work within the same job family and level.

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This usually means organising by function, then by role, then by grade or level. If you don't have a grading architecture in place, that's your first stumbling block. Read our guide to pay structures for a detailed look at how to set one up.

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One thing to flag at this stage: the biggest unjustifiable gaps I see tend to be between long-serving employees and recent hires in the same role. Organisations look externally to recruit, bring people in at current market rates, but never adjust the people who've been there for ten years. I call it the tenure trap, and it's more common than most people think.

Step 4: Run the analysis

For most mid-market organisations, a like-for-like comparison is the right starting point. Take each role group, line up the pay data, and look at the spread. Where you have four people doing the same job and one is paid significantly less, that's your signal to investigate.

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Larger organisations may want to run a regression analysis, which controls for multiple variables at once: role, tenure, location, performance rating. That's more statistically robust but requires analytical capability or external support. For a 300-person company running its first audit, a structured like-for-like comparison will surface the main issues.

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Don't forget: you're looking at job families, then roles within those families. You can't shortcut that by lumping broad functions together. The comparisons need to be genuinely like for like.

Step 5: Investigate and explain gaps

Not every pay gap is a pay equity problem. Differences can be legitimate if they're based on facts: tenure, performance, additional qualifications, or specific market conditions at the time of hire. The key word is facts. Manager gut feel doesn't count.

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Where it gets difficult is with operational or prescriptive roles. If you have warehouse operatives all doing exactly the same job in exactly the same way, it's very hard to argue that one person is providing more value than another just because they've been there longer. Knowledge roles tend to have more room for justifiable differentiation.

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Document everything. For each gap, record whether it's justifiable or not, what evidence supports it, and what action is needed. This documentation protects you if a claim is raised later.

Step 6: Build your remediation plan

Once you've genuinely confirmed a problem, you have to decide how to fix it. This is where it gets sensitive.

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On the surface, giving someone a pay rise sounds like good news. But if it's not handled properly, it can really backfire.

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The employee's first question might be: why am I getting this now? If the conversation isn't managed well, it can turn into a backdated claim. The organisation needs to think not just about the adjustment going forward, but how far back the underpayment goes.

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My view: transparency, done well, is always the safer long-term play. Have an honest conversation. Explain what happened, why, and what you're doing about it. The alternative, quietly adjusting pay and hoping nobody asks, leaves you exposed.

Step 7: Put governance in place so it doesn't happen again

Finally, you need to prevent drift. That means proper banding, management training on pay decisions, clear frameworks for new appointments and promotions, and regular reviews. Read our guide to salary adjustments for more on how to structure this.

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It sounds boring, but governance is what stops you from ending up back in the same position in two years. Without it, you've just got managers in the wild west doing whatever they want.

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There's a people side to this too. If employees feel they can raise a pay concern without putting a target on their back, you'll catch problems earlier. That only happens if the organisation has made it clear that equity is genuinely valued, not just reported on.

Step 8: Benchmark against the market

Internal equity is only half the picture. Once you've fixed the gaps inside your organisation, you need to check that your corrected rates are competitive externally, and that new hires aren't about to create fresh problems.

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A salary benchmarking tool lets you compare roles against live UK market rates by location and sector. That gives you the evidence to set defensible pay ranges and spot where the market has moved before it creates another round of internal drift. For a deeper look at how benchmarking fits into pay decisions, read our guide to salary benchmarking.

What are common mistakes when analysing pay equity?

I see the same patterns repeatedly. Here's what to watch for.

Only auditing gender

Gender is the legal reporting requirement, so it gets the attention. But if you're only looking at one dimension, you're doing a partial review. Ethnicity, disability, age, and tenure-based gaps are just as real and just as damaging.

Treating it as a PR exercise

Some organisations want to say they actively monitor pay equity as part of their employee value proposition. The reality is they're doing lip service: a surface-level review that avoids looking too closely. That's worse than doing nothing, because it creates a false sense of security.

Burying heads in the sand

This is the big one. Once you find a problem, you have to fix it, and fixing it costs money. So some organisations deliberately limit the scope of their audit because they don't want to open Pandora's box.

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I see it a lot in fast-growing businesses that have scaled to 200 or 300 people without putting the right structures in place. The pay decisions were made in a hurry, nobody went back to check, and now there's a mess to untangle.

Not connecting recruitment to internal pay reviews

Most organisations treat them as completely separate processes. Nobody checks what the new hire's salary does to the equity of the existing team. By the time someone raises it, you've got three or four people in the same role on different rates and no good explanation for why.

Treating it as one-and-done

Running a single audit without putting governance in place is like fixing a leak without checking the pipes. You'll be back in the same position within a couple of years.

What does pay equity look like in practice?

Most pay equity problems don't come from deliberate underpayment. They come from the absence of structure. Managers make decisions based on what feels right, new hires negotiate different starting points, and over time the gaps compound without anyone noticing.

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Greater Anglia, the East of England rail operator, is a good example. Before using our salary benchmarking tool, their HR team found that pay negotiations relied on subjective comparisons with colleagues at a similar level, which introduced unintentional biases into the whole process. 

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By moving to evidence-based benchmarks on a role-by-role basis, they could surface pay discrepancies and make recommendations that were fully justifiable rather than based on assumptions.

The ask gap: why starting salaries matter

Starting salaries are where a lot of equity problems begin. Research from Reed found that only 41% of women negotiate their salary when offered a new role, compared with 61% of men. Their research found the same pattern among ethnic minorities.

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That gap compounds over time with percentage-based increases. It's one of the reasons the proposed pay transparency laws, including salary range disclosure in job adverts, are so important: they level the playing field before employment even begins.

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Research from Catalyst backs this up: UK organisations that publish pay gap data and conduct annual audits are nearly six times more likely to report that their DEI practices drive business performance. The common thread is accountability. Structure beats good intentions.

What’s the current state of UK pay equity legislation?

The Equality Act 2010 remains the foundation. Its equal pay provisions give men and women the right to equal pay for equal work, like work, or work of equal value. Its broader discrimination protections cover all protected characteristics, including race, disability, and age.

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Since 2017, employers with 250 or more employees have been required to report their gender pay gap annually. Our breakdown of the gender pay gap problem explains what the numbers mean for mid-market employers. The Employment Rights Act 2025 takes this further: from spring 2027, those employers must also publish equality action plans setting out what they're doing to close their gap. Voluntary reporting opened in April 2026.

What's coming next for UK pay equity?

On ethnicity and disability, the government confirmed in March 2026 that mandatory pay gap reporting for large employers will be introduced through the forthcoming Equality (Race and Disability) Bill. The exact timeline isn't fixed yet, but it's a question of when, not if. The biggest practical challenge will be data: ethnicity and disability status rely on employee self-reporting, and many employees prefer not to disclose. Start collecting now.

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Pay transparency is also moving fast. The UK government's latest guidance on pay transparency published in March 2026 explicitly calls on employers to include pay information in job adverts and make it clear when pay is negotiable. And while the EU Pay Transparency Directive doesn't apply directly post-Brexit, the UK is clearly heading in the same direction.

Making pay equity stick

Every step in this guide is pointless if your organisation doesn't mean it. I've seen plenty of technically sound audits where everything drifted back within two years because nobody at the top was genuinely committed to the change.

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The ones that get it right are the ones where senior leaders take on the issue themselves. Then it becomes part of the culture, rather than just a box-ticking procedure.
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• Run the full audit, not a partial one. Cover all protected characteristics and tenure.
• Investigate every gap. Justify it with facts or fix it.
• Communicate transparently. A badly handled pay rise can be worse than no pay rise.
• Put governance in place so you don't drift back. Banding, frameworks, regular reviews.

Once your internal equity work is done, you’ll need market data to keep your pay ranges fair. As I mentioned before, HR DataHub's salary benchmarking features let you compare roles against live UK market rates, filter by location and sector, and export the evidence you need to back up every pay decision. If you're not sure where your gaps are, try our free trial and see for yourself.

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