TREX Pay Equity Analysis & Remediation 3 — Questions and Answers
Question 1: A pay equity analyst finds a p-value of 0.03 for the gender coefficient in a regression model. At the 0.05 significance level, what is the correct interpretation?
- The pay gap is practically significant but not statistically significant
- The pay gap is statistically significant, meaning it is unlikely due to chance (Correct answer)
- The model explains 3% of pay variance
- Gender accounts for $0.03 of every dollar in pay
Correct answer: The pay gap is statistically significant, meaning it is unlikely due to chance
A p-value of 0.03 is below the 0.05 threshold, indicating the observed pay gap is statistically significant and unlikely to be a result of random variation.
Question 2: Which of the following best describes 'intersectionality' in the context of pay equity analysis?
- The overlap between base pay and variable pay components
- The combined effect of multiple protected characteristics creating unique pay disadvantages (Correct answer)
- The point where an employee's pay crosses the grade midpoint
- The intersection of market data from multiple salary surveys
Correct answer: The combined effect of multiple protected characteristics creating unique pay disadvantages
Intersectionality examines how multiple protected class identities (e.g., race and gender combined) can create pay disadvantages that single-variable analysis would miss.
Question 3: An OFCCP compliance review requires a federal contractor to submit compensation data. Under what regulation is this requirement primarily grounded?
- Fair Labor Standards Act (FLSA)
- Executive Order 11246 (Correct answer)
- Title IX of the Education Amendments
- WARN Act
Correct answer: Executive Order 11246
Executive Order 11246 prohibits federal contractors from discriminating in employment, including compensation, and authorizes OFCCP to conduct compliance reviews.
Question 4: What does a compa-ratio of 0.88 indicate about an employee's pay?
- The employee is paid 12% above the grade midpoint
- The employee is paid 12% below the grade midpoint (Correct answer)
- The employee's pay falls below the minimum of the salary range
- The employee has 88 percentile standing in the salary range
Correct answer: The employee is paid 12% below the grade midpoint
A compa-ratio of 0.88 means the employee's pay is 88% of the range midpoint, placing them 12% below the midpoint.
Question 5: During a pay equity audit, which variable is most commonly flagged as a 'tainted' or 'suspect' factor that should be excluded from a regression model?
- Years of relevant experience
- Prior salary from a previous employer (Correct answer)
- Performance rating from the most recent review cycle
- Educational degree level
Correct answer: Prior salary from a previous employer
Prior salary is considered a tainted factor because it may perpetuate historical discrimination; several courts and jurisdictions have ruled it cannot justify pay differences.
Question 6: A company conducts a pay equity analysis and discovers that race explains a statistically significant portion of pay variance. The most appropriate immediate next step is to:
- Publish the findings in the annual report to shareholders
- Engage legal counsel and investigate root causes before taking corrective action (Correct answer)
- Terminate the managers whose teams show the largest disparities
- Freeze all merit increases until the gap is resolved
Correct answer: Engage legal counsel and investigate root causes before taking corrective action
Before remediation, engaging legal counsel ensures findings are protected under attorney-client privilege and that root-cause investigation is properly scoped.
Question 7: Which metric compares an employee's position within their salary range and is calculated as (salary − range minimum) ÷ (range maximum − range minimum)?
- Compa-ratio
- Range penetration (range position) (Correct answer)
- Pay equity index
- Grade midpoint ratio
Correct answer: Range penetration (range position)
Range penetration (also called range position or salary range position) measures where an employee falls within their grade range on a 0–100% scale.
TREX Pay Equity Analysis & Remediation 3
A pay equity analyst finds a p-value of 0.03 for the gender coefficient in a regression model.
At the 0.05 significance level, what is the correct interpretation?