The Fair Pay Matrix

To measure and eliminate pay discrimination, a whole range of informative indicators and characteristics of discrimination can be enlisted to identify unequal treatment.

The following overview gives possible variables and key performance indicators (KPIs) that can be used to assess progress in equal pay implementation and gauge the success of equality policies.

Calculating differences in income

The basis for calculating the variables and indicators is formed by employee data that are often routinely captured digitally via HR software. In the UK, for example, the BBC (the public service broadcaster) breaks down very precisely which characteristics lead to which discrepancies. Thus in 2020, differences in income amounting to 4.9% were attributable to disability, 3% to ethnic origin, 3.9% to part-time employment and -0.3% to sexual orientation. Often, several grounds of discrimination (such as gender or ethnic origin) are compounded for individual employees, resulting in even greater income disparities. Overall, pay gaps based on ethnic origin are much more closely monitored in the USA or New Zealand than has been the case to date in most other countries.

Keeping an eye on discrimination

The Fair Pay Matrix brings together various types of discrimination in a simple overview and displays the relevant data like a car dashboard. This enables decision-makers and HR managers to map and monitor fair pay implementation. Analysis is possible for companies with at least 50 employees. It is based on the statistical method of multiple regression analysis, using Blinder-Oaxaca decomposition, which is regarded as the benchmark in gender pay gap analysis. The Fair Pay Matrix serves as a basis for analysing the pay structures in a company or organisation; the variables and indicators shown here can be expanded.

Expanding room for manoeuvre

The matrix can serve as the basis for the test methods that show companies and organisations where action is needed and where adjustments can be made in order to implement equality and fair pay.

The indicators can also be matched to the UN Sustainable Development Goals. The matrix can thus be used to monitor how well a company is aligned to the SDGs. The implementation of the whole United Nations Agenda 2030 depends decisively on whether equality can be achieved as an across-the-board objective.

 

Indicators of possible unequal treatment	Connection to UN Sustainable Development Goals*	Basis of discrimination
Year of birth	8.5* 10.2*	Discrimination based on age
Sex	8.5*	Discrimination based on sex
Disability	8.5* 10.2*	Discrimination based on disability
Sexual orientation	8.5* 10.2*	Discrimination based on sexual orientation
Ethnic origin	8.5* 10.2*	Discrimination based on ethnic origin
Nationality	8.5* 10.2*	Discrimination based on nationality
Years of service	5.4*	-
Education	-	-
Further training	5.5*	Restricted access to continuing professional development
Role	-	-
Position	5.5*	Vertical discrimination
Level of qualifications	5.5*	Horizontal discrimination
Time out, e.g. parental leave, nursing leave	5.4*	Personal responsibilities that affect career development
Contract type	-	Variable that has a significant influence on the gender pay gap
Working hours	-	Variable that has a significant influence on the gender pay gap
Public / private sector	-	Variable that has a significant influence on the gender pay gap
Company size	-	Variable that has a significant influence on the gender pay gap
Basic salary	All those named	Sum total of all factors

*UN Sustainable Development Goals:

Goal 5: Achieve gender equality and empower all women and girls.

5.4  Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies and the promotion of shared responsibility within the household and the family as nationally appropriate.

5.5  Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life.

Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

8.5  By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.

Goal 10: Reduce inequality within and among countries

10.2 By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.