Pay equity: means employees doing the same or substantially similar work receive equal pay, regardless of gender, race, or other protected characteristics, unless differences are explained by legitimate factors such as experience, performance, or location. It's both a legal requirement and a measure of fairness.
Key takeaways
- The Equal Pay Act of 1963 requires equal pay for equal work regardless of sex.
- Title VII and many state laws extend protection to race and other characteristics.
- Women working full-time, year-round earned 83% of men's median earnings in 2024, per Census data.
- A pay equity audit compares similar roles while controlling for legitimate pay factors.
How pay equity works
Pay equity is different from the overall pay gap. The gap compares all women's earnings with all men's, reflecting differences in roles and hours as well as pay discrimination. Pay equity compares people in comparable work. Under the Equal Pay Act, pay differences between men and women in substantially equal jobs must be explained by seniority, merit, a system measuring production, or another factor other than sex. Several states, including California, New York, and Massachusetts, set stricter standards.
An audit groups employees in comparable roles, then uses statistical analysis to check whether pay differences remain after accounting for legitimate factors like experience, performance, and location. Unexplained gaps are investigated and corrected, often with privileged review by counsel.
Pay equity example
A 600-person firm runs an audit and finds women in senior analyst roles earn 4.2% less than men after controlling for tenure, rating, and location. Digging in, it finds that starting salaries were negotiated individually and the gap began at hire. It adjusts pay for 31 employees at a total cost of $118,000, adopts salary ranges for every role, and stops asking for salary history, which many states already ban.
Why pay equity matters for employers
Gaps persist. The Census Bureau reports that women's median earnings were 83% of men's among full-time, year-round workers in 2024 (US Census Bureau, Equal Pay Day 2026). While not all of that is unequal pay for equal work, it signals where to look.
Pay transparency laws in a growing number of states now require salary ranges in job postings, which makes internal inequities visible to employees. Regular audits, structured offers, and range discipline protect both fairness and the company. See our pay transparency laws guide and salary bands guide.
Common pay equity mistakes to avoid
Using salary history to set pay
It carries past gaps forward, and many states ban asking.
Unstructured negotiation
Use ranges and documented criteria for every offer.
Auditing once
Check pay equity at least annually and after merit cycles.
Ignoring bonuses and equity
Analyze total pay, not just base salary.
Pay equity: questions people also ask
What is the difference between pay equity and the gender pay gap?
What laws require pay equity?
What is a pay equity audit?
How often should employers audit pay equity?
Can employers ask about salary history?
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HRTally glossary entries are written by people who have run US payroll, benefits, and HR operations, then checked line by line against primary sources such as the IRS, Department of Labor, EEOC, and Bureau of Labor Statistics. Dollar limits and rates are for 2026 unless stated. We review every entry at least twice a year and whenever a rule changes. This page explains general rules and isn't legal or tax advice; state law can differ. Read our editorial standards.
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<blockquote>Pay equity means employees doing the same or substantially similar work receive equal pay, regardless of gender, race, or other protected characteristics, unless differences are explained by legitimate factors such as experience, performance, or location. It's both a legal requirement and a measure of fairness.</blockquote><p>Source: <a href="https://www.hrtally.com/hr-glossary/pay-equity/">HRTally HR Glossary, Pay equity</a></p>
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.