TREX Pay Equity Analysis & Remediation 2 — Questions and Answers
Question 1: Which statistical method is most appropriate for isolating the effect of gender on pay while controlling for legitimate pay factors such as job level and tenure?
- Simple correlation analysis
- Multiple regression analysis (Correct answer)
- T-test comparison of means
- Compa-ratio benchmarking
Correct answer: Multiple regression analysis
Multiple regression analysis controls for legitimate pay factors simultaneously, allowing the analyst to isolate the effect of a protected class variable on pay.
Question 2: An organization identifies a statistically significant pay gap of $2,800 for female employees after controlling for job-related factors. Which term best describes this unexplained residual?
- Raw pay gap
- Adjusted pay gap (Correct answer)
- Compa-ratio variance
- Grade range penetration
Correct answer: Adjusted pay gap
The adjusted (or unexplained) pay gap is the difference that remains after controlling for legitimate pay determinants, signaling potential inequity.
Question 3: A company groups employees into 'similarly situated employee groups' (SSEGs) before running a pay equity analysis. What is the primary purpose of this grouping?
- To reduce the dataset size for computational efficiency
- To ensure comparisons are made among employees doing comparable work (Correct answer)
- To align the analysis with IRS compensation rules
- To calculate grade midpoint penetration rates
Correct answer: To ensure comparisons are made among employees doing comparable work
SSEGs ensure that pay comparisons are limited to employees performing similar work under similar conditions, which is a prerequisite for a valid equity analysis.
Question 4: Under the Equal Pay Act of 1963, which four factors are recognized as affirmative defenses that justify pay differences between men and women?
- Education, experience, certification, and market rate
- Seniority, merit, quantity/quality of production, and any factor other than sex (Correct answer)
- Job title, department, location, and performance rating
- Tenure, grade level, shift differential, and geographic pay zone
Correct answer: Seniority, merit, quantity/quality of production, and any factor other than sex
The EPA allows pay differences based on seniority systems, merit systems, systems measuring earnings by quantity or quality of production, and any factor other than sex.
Question 5: What is the primary risk of using job title alone (without job evaluation) when defining comparison groups in a pay equity study?
- It overstates the sample size for statistical testing
- It may mask inequities where different titles perform substantially equal work (Correct answer)
- It inflates compa-ratios for lower-grade employees
- It conflicts with FLSA overtime classification rules
Correct answer: It may mask inequities where different titles perform substantially equal work
Job titles can differ even when the actual work performed is substantially equal, so title-only groupings can hide inequities the law is designed to address.
Question 6: During remediation, an organization decides to raise the pay of underpaid employees but not to reduce the pay of overpaid employees. This approach is called:
- Pay compression correction
- Salary red-circling
- One-way adjustment policy (Correct answer)
- Pay inversion elimination
Correct answer: One-way adjustment policy
A one-way (upward-only) adjustment policy is the standard remediation approach, since lowering pay of overpaid employees is generally illegal and damages morale.
Question 7: Which agency enforces Title VII of the Civil Rights Act of 1964 as it applies to compensation discrimination?
- Department of Labor (DOL)
- Office of Federal Contract Compliance Programs (OFCCP)
- Equal Employment Opportunity Commission (EEOC) (Correct answer)
- National Labor Relations Board (NLRB)
Correct answer: Equal Employment Opportunity Commission (EEOC)
The EEOC is the federal agency responsible for enforcing Title VII, which prohibits compensation discrimination based on race, color, religion, sex, and national origin.
TREX Pay Equity Analysis & Remediation 2
Which statistical method is most appropriate for isolating the effect of gender on pay while controlling for legitimate pay factors such as job level and tenure?