Salary equity is the principle that employees should be compensated fairly based on legitimate, job-related factors like experience, education, performance, and responsibilities, rather than characteristics like gender, race, or ethnicity. It’s different from simply paying everyone the same amount. Two people in the same role can earn different salaries under a salary equity framework, as long as the difference is explained by qualifications or performance rather than demographics. In 2024, women earned an average of 85 cents for every dollar men earned, according to Pew Research Center, which helps explain why salary equity has become a major focus for employers and lawmakers alike.
Salary Equity vs. Pay Equality
These two terms sound interchangeable, but they describe very different approaches to compensation. Pay equality means everyone in the same job gets the same pay, period. A company practicing strict pay equality would give every marketing manager the same base salary and the same 2% bonus, regardless of how long they’ve been in the role or how well they performed.
Salary equity takes a broader view. It allows pay differences as long as those differences are tied to legitimate factors. An employee with 10 years of experience and an MBA might earn more than a colleague with 5 years of experience and a bachelor’s degree, even if they hold the same title. A high performer might receive a larger bonus than someone who simply meets expectations. The key test isn’t whether everyone earns the same number. It’s whether the gaps that exist can be explained by something other than who the person is.
Most modern compensation strategies aim for equity rather than equality, because flat pay structures can actually create their own form of unfairness by ignoring meaningful differences in contribution and expertise.
How Companies Measure It
Organizations assess salary equity through a process called a pay equity audit, which uses statistical analysis to identify whether demographic factors are influencing compensation after accounting for legitimate variables like tenure, education, job level, and location.
The most common method for larger workforces is multiple linear regression, a statistical technique that isolates the effect of gender or race on pay while controlling for other factors. If the analysis shows that women or minority employees earn less even after accounting for experience, role, and performance, that’s a red flag the organization needs to address. For individual cases, companies use residual analysis, which compares a specific employee’s actual pay against what the regression model predicts they should earn. A significant gap between predicted and actual pay signals a potential equity issue worth investigating.
Not every company has enough employees to run a full regression. A common guideline is the “30/5” rule: the total sample needs at least 30 employees, and the smaller of the two groups being compared needs at least 5. Companies that don’t meet those thresholds use simpler statistical methods or conduct individual file reviews, examining starting pay, promotion history, and training differences for each employee.
The final step in a thorough audit is cohort analysis, where compensation experts look at small, comparable groups of employees in detail. This is custom work that can’t be automated with a standard formula, but it’s often where the most actionable findings emerge.
What the Pay Gap Looks Like Today
The gender pay gap has narrowed over the past two decades, but it hasn’t closed. In 2024, women earned 85% of what men earned when comparing median hourly earnings across both full-time and part-time workers. For full-time, year-round workers, the Census Bureau’s most recent data (from 2023) puts the figure at 83 cents on the dollar.
The gap is smaller among younger workers. Women aged 25 to 34 earned 95 cents for every dollar earned by men in the same age group in 2024, a 5-cent gap compared to the 15-cent gap across all ages. This suggests that entry-level pay has become more equitable, but disparities tend to widen as careers progress, often at the points where promotions, negotiations, and caregiving responsibilities diverge.
Racial pay gaps add another layer. Salary equity analysis within organizations typically examines both gender and race simultaneously, because a company could have no gender gap overall while still underpaying employees of a particular racial or ethnic group within specific departments or job levels.
Pay Transparency Laws
A growing number of states now require employers to disclose salary ranges in job postings, which directly supports salary equity by making it harder for pay gaps to hide behind secrecy. In 2025, Illinois, Minnesota, Massachusetts, New Jersey, and Vermont joined the list of states with pay transparency laws, and more states have legislation in the pipeline.
These laws vary in their specifics. Some apply only to employers above a certain size, often 15 or 25 employees. Some require a general description of benefits and other compensation alongside the salary range. The overall trend is clear: employers are increasingly expected to be upfront about what a role pays, both to external candidates and to current employees applying for internal positions.
For job seekers, this shift is significant. When salary ranges are posted publicly, you can compare what you’re earning against what your employer is offering new hires for the same or similar roles. That information becomes leverage for negotiation and a concrete data point if you suspect an equity issue.
How Salary Equity Affects You
If you’re an employee, salary equity determines whether the factors driving your pay are things you can control (your skills, your output, your experience) or things you can’t (your gender, your race, your age). You can ask your employer whether they’ve conducted a pay equity audit and what the results showed. In many organizations, HR will share at least a summary of their findings, particularly if the company has made public commitments to equity.
If you’re a manager or business owner, building salary equity into your compensation structure means documenting why each employee earns what they earn. Every pay decision, whether it’s a starting salary, a raise, or a bonus, should tie back to a defined set of criteria. This protects the organization legally and builds trust with employees who can see the logic behind their compensation. Implementing pay equity involves evaluating not just base salaries but the distribution of leadership roles, access to career advancement, and how organizational policies affect different demographic groups differently.
If you’re job hunting, salary equity shows up in practical ways. Companies that take it seriously tend to use structured salary bands for each role and level, reduce reliance on salary history (which can perpetuate past inequities), and post compensation ranges in their job listings even in states that don’t require it.