Bridging the gender gap: How to conduct an internal pay equity audit

June 2, 2026

Drew Maginn

While many organizations want to build a relationship based on trust and transparency with their employees, internal pay equity continues to be an issue in most industries. Of those impacted, women often benefit most from an equal pay review, ensuring that they are fairly compensated for their work. However, if you are tasked with the responsibility of correcting salary inequities effectively in your organization, rest assured that there is a step-by-step process you can follow to get you there.

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Why should organizations prioritize a pay gap analysis?

Unfortunately, when it comes to addressing the gender pay gap, Canada continues to underperform. According to the Canadian Centre for Policy Alternatives, Canada ranks 26th out of 31 peer countries, as women earn 87 cents per hour for each dollar earned by men. And if this discrepancy alone isn’t reason enough to take action, you may be legally required to act under federal and provincial pay equity laws. Consulting tools like the Pay Equity Compass can clarify whether a pay equity audit is a must for your organization or simply the right thing to do.

” Unfortunately, when it comes to addressing the gender pay gap, Canada continues to underperform. ”

Walking the right path: Simple steps to an equitable pay structure

Whether required or not, once your organization makes a commitment to move ahead with an internal pay equity audit, established steps should guide your process, as outlined in detail by the Canadian Human Rights Commission.

Step 1 – Identify and group job classes: This step requires grouping job positions, or roles that employees have in an organization, according to similarities in duties and responsibilities, qualifications, recruiting procedures and compensation.
Step 2 – Determine the predominant gender of different job classes: After establishing the job classes, you must determine the gender of each job class (male, female or neutral). This is done using the following criteria:
- Current incumbency (e.g., what percentage of positions are held by men and by women?);
- Historical incumbency (e.g., what is the predominant gender of those holding these positions in the past?); and
- Gender stereotypes (e.g., are any of these positions stereotyped as “male” or “female” jobs?).

All three criteria don’t necessarily need to match perfectly to determine the gender of a job class. For example, a job class might currently have an even distribution of men and women (incumbency) but be gendered as female based on the employment history and stereotypes associated with it.

Step 3 – Evaluate your job classes: If you determine that you have female and male job classes in Step 2, begin quantifying the contribution of each job class based on skill, effort, responsibility and working conditions. As a general rule, you do not need to evaluate gender-neutral job classes.
Step 4 – Calculate total compensation: Using all elements of compensation (e.g., base salary, benefits, incentives/perks, time off), determine job rates for each class by converting total compensation into a common unit of measurement, typically an hourly rate.
Step 5 – Compare male and female job classes: Directly compare female and male job classes to one another. This may be done using approaches like the job-to-job method, proportional value method or equal average/line methods.
Step 6 – Identify and implement pay adjustments: Based on the comparisons from Step 5, determine whether pay increases are owed to any female job classes and how these increases will be managed. Keep in mind that you may be able to phase in increases over time if they represent more than one per cent of your previous year’s payroll. General guidelines are to implement the changes within five years for organizations with 10 to 99 employees and within three years for organizations with 100 or more employees.
Step 7 – Maintain your system: Maintain pay equity by managing your system to ensure that new pay gaps do not emerge in the future.

Understanding the dos and don’ts of pay equity compliance

As you move through your pay equity audit, follow these tips to ensure that your process in sound and defendable:

Don’t make assumptions about “male” and “female” employees: Before determining the gender predominance of different job classes, consider completing a gender count to survey employees and update your records. According to the Canadian Human Rights Commission, employees should be grouped according to whether they identify as “male” or “female”, and if they don’t identify as either, they would not be included in your audit.
Do keep good records: Once you have completed your audit, make sure you clearly document your work to revisit in the future. This includes archiving all documents in one place, removing old drafts and using consistent file naming so others can easily find information when they need it.
Do communicate your findings: Conducting an equity pay audit is an important process, but it can be time consuming. However, all your hard work might be called into question if it is not openly discussed with your employees. If required by law, pay equity plans must be shared publicly, but consider developing additional materials like summary documents for employees and reference documents for managers who may receive specific questions from those reporting to them about why changes were, or were not, made.

While improvements have been made to shrink the pay gap in Canada, there is still plenty of work to be done. It is always good practice to be ahead of the curve and proactive in assessing whether pay inequities exist between male and female employees. Addressing pay equity today is essential to building a more inclusive, competitive and equitable workplace in the future.

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