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Check pay equity before approving an offer: 5 checks

Compare the actual work and compensation, then check the proposed differences against the applicable jurisdiction's requirements, using the federal baseline. U.S. Equal Employment Opportunity Commission defines the starting point for this review.

Key takeaways

  • Confirm equal pay coverage first. The federal rule applies once you have at least one employee ( U.S. Equal Employment Opportunity Commission).
  • Compare duties and working conditions, not job titles. Under The Commonwealth of Massachusetts General Court, a job title alone does not determine comparability.
  • Count every form of pay, including bonuses and commissions. The same Massachusetts source defines wages to include all forms of remuneration for employment.
  • Keep prior salary out of the justification. Under the same source, previous wage or salary history is not a defense to an action.

Offer pay equity: the checks before approval

The five checks form the core of the offer approval process. First, verify equal pay coverage to confirm the law applies to your team size. Second, assess comparable work and compensation by examining the actual duties rather than job titles. Third, review documented bonus distinctions to ensure any extra pay follows a verifiable system. Fourth, identify salary history limits that restrict using prior pay as a justification. Fifth, confirm pay reduction prohibitions to avoid cutting existing employees' wages to match a new hire. These checks preserve each source's jurisdiction while building a defensible rationale for the offer.

CheckPublisherCore Requirement
Equal pay coverageU.S. Equal Employment Opportunity Commission Covers employers with at least one employee
Federal framework U.S. Equal Employment Opportunity CommissionEPA is part of the Fair Labor Standards Act of 1938

Use this table as the starting point for your offer review. Verify the coverage row first to confirm the law applies. Then check the federal framework row, and use the state sections below for rules that apply to your hiring location. If your team operates in multiple jurisdictions, determine which jurisdiction's requirements apply to each employment situation. This approach ensures you address the correct legal standard before approving the compensation package.

Start with coverage and compare the actual work

Before approving a proposed job offer, verify that your business falls under equal pay coverage and define the comparable work using specific factors rather than job titles. The U.S. Equal Employment Opportunity Commission states that if you have at least one employee, you are covered by the law that requires employers to provide equal pay for equal work to male and female employees U.S. Equal Employment Opportunity Commission. Do not assume a very small employer is outside this coverage. The Equal Pay Act of 1963 is part of the Fair Labor Standards Act of 1938, as amended, according to the U.S. Equal Employment Opportunity Commission. This federal framework establishes the baseline for the offer review.

When comparing the new hire's role to existing positions, look beyond the job title. The Commonwealth of Massachusetts General Court defines comparable work as work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions The Commonwealth of Massachusetts General Court. A job title or job description alone shall not determine comparability. You must examine the actual duties to see if they match these criteria.

Working conditions are a specific part of this comparison. The Commonwealth of Massachusetts General Court specifies that working conditions include the environmental and other similar circumstances customarily taken into consideration in setting salary or wages The Commonwealth of Massachusetts General Court. This includes reasonable shift differentials, and the physical surroundings and hazards encountered by employees performing a job. If the new role involves different hazards or shifts than the comparable role, note these differences in your review.

Comparison FactorPublisherDefinition or Standard
Coverage thresholdU.S. Equal Employment Opportunity CommissionAt least one employee
Comparable work The Commonwealth of Massachusetts General CourtSubstantially similar skill, effort, responsibility; similar working conditions
Working conditions The Commonwealth of Massachusetts General CourtEnvironmental circumstances, shift differentials, physical surroundings, hazards
Wages definition The Commonwealth of Massachusetts General CourtAll forms of remuneration for employment

Write down the skill, effort, and responsibility required for the new role and compare them directly to the existing role. Check the physical surroundings and hazards to ensure the working conditions are similar. If the roles differ in these areas, document the specific differences before moving to the compensation components. A interview scorecard gives you a consistent format for recording these notes.

Illustrative example: comparing two roles

Suppose the open role pays $75 an hour and an existing role pays $80 an hour. List each job's skill, effort, responsibility, and working conditions side by side. If the duties match and the only difference is a night shift, the shift differential may be a documented working-conditions reason for part of the gap. If nothing in your notes explains the $5 difference, revisit the offer before approval. Record the reason in the file before the offer goes out.

Check the bonus basis against Oregon's examples

When reviewing a proposed offer, verify that any bonus structure relies on a documented, consistent system rather than one-off decisions. The Oregon Bureau of Labor and Industries provides specific examples of how employers can distinguish compensation through education, seniority, and merit factors while maintaining legal compliance.

Education-based distinctions

An employer may pay a $7,000 sign-on bonus to an engineer with a highly desirable degree, such as aerospace engineering, under the education factor Oregon Bureau of Labor and Industries. If the bonus causes compensation to be unlawfully unequal, the employer must give every other engineer with that degree an equivalent increase in compensation. This requirement ensures that the education factor does not create a pay gap among similarly qualified staff.

Seniority-based distinctions

A health care provider may create a policy paying nurses a one-time retention bonus of 5% on completion of 12 months with the organization under their seniority system Oregon Bureau of Labor and Industries. The provider must pay this bonus to all nurses performing work of comparable character who complete the 12-month period. This example illustrates that seniority bonuses must be applied uniformly to all eligible employees performing comparable work, not just a subset of the workforce.

Merit-based distinctions

A hospitality provider may create a policy paying a merit bonus to staff that receive a 5 out of 5 on their annual performance review Oregon Bureau of Labor and Industries. The employer would not need to pay this bonus to those that did not receive 5 out of 5 on their performance review. This distinction is permissible because it is based on a specific, measurable performance outcome.

Verifiable system requirement

All of these bonus structures must operate within a consistent and verifiable system for the pay structure Oregon Bureau of Labor and Industries. In practice, that means keeping a written record of how bonuses are awarded, who is eligible, and how amounts are calculated. Without this verifiable system, the bonus distinctions may not hold up as legitimate factors.

Bonus TypePublisherExample Condition Equivalence Requirement
Education bonusOregon Bureau of Labor and Industries$7,000 sign-on for aerospace degree Equivalent increase for same-degree engineers if the bonus causes unlawful inequality
Seniority bonusOregon Bureau of Labor and Industries 5% retention bonus after 12 monthsPay to all nurses performing comparable work completing 12 months
Merit bonusOregon Bureau of Labor and Industries Bonus for 5 out of 5 performance reviewNot required for those not receiving 5 out of 5

Review your current bonus policies to ensure they meet the consistency and verifiability standards described by the Oregon Bureau of Labor and Industries.

Remove unsupported salary-history reasoning and pay cuts

When you review a proposed offer, verify that the compensation rationale does not rely on the applicant's past earnings. In Massachusetts, an employee's previous wage or salary history shall not be a defense to an action, according to The Commonwealth of Massachusetts General Court. This rule applies to General Law - Part I, Title XXI, Chapter 149, Section 105A. If your offer documentation cites prior pay as the reason for a specific rate, that reasoning is not a valid defense under this statute.

Washington State Legislature rules also restrict how you handle prior pay information during the hiring process. Under RCW 49.58.100, an employer may not require that an applicant's prior wage or salary history meet certain criteria, except as provided in subsection (2) of this section, according to the Washington State Legislature. Check subsection (2) for its exceptions before relying on this rule. For more on these rules, see salary history questions.

JurisdictionPublisherRestriction
MassachusettsThe Commonwealth of Massachusetts General Court Previous wage or salary history shall not be a defense
WashingtonWashington State Legislature May not require prior wage/salary history to meet criteria, except as provided in subsection (2)

Do not propose cutting another employee's pay to correct a pay gap or to equalize compensation. An employer who is paying a wage differential in violation of this section shall not reduce the wages of any employee solely in order to comply with this section, according to The Commonwealth of Massachusetts General Court. This prohibition exists alongside Oregon's equal-compensation requirement and pay-cut prohibition, which are covered in other sections. Your offer approval process should flag any rationale that references an applicant's prior earnings as a basis for the new rate.

To complete this check, review the offer memo and remove any language that justifies the proposed salary based on the applicant's previous pay. If the documentation requires prior pay to meet specific criteria, verify whether that requirement aligns with the Washington State Legislature's restriction. Keep the compensation rationale focused on the work performed and the applicable jurisdiction's requirements for comparable roles.

Offer approval reference table by publisher

The table below consolidates the specific jurisdictional rules from each publisher for your offer review.

PublisherJurisdiction/ScopeKey Rule for Offer Review
U.S. Equal Employment Opportunity Commission Federal (FLSA/EPA)Coverage applies with at least one employee
The Commonwealth of Massachusetts General CourtMassachusetts Comparable work defined by skill, effort, responsibility, conditions; titles insufficient
Oregon Bureau of Labor and IndustriesOregonFactors listed in a collective bargaining agreement may justify different pay levels for comparable work

Use this reference to verify that your proposed compensation differences align with the specific definitions and exceptions available in each jurisdiction.

Keep the work comparison and compensation rationale on file

When you document the basis for a pay difference, record the specific work elements and compensation components that support the decision. A hiring decision debrief is one place to keep these reasons. The file should show that the proposed offer does not rely on lowering another employee's current pay to resolve a disparity.

In Oregon, the Oregon Bureau of Labor and Industries requires that employees get equal compensation for equal work regardless of race, color, religion, sex, sexual orientation, gender identity, national origin, marital status, veteran status, disability, or age. The same source specifies that employers may not cut an employee's pay to make it equal with other employees' pay. This restriction prevents using pay reductions as a method to achieve equality. When reviewing an offer, ensure your documentation reflects the actual work performed and the compensation structure without referencing a plan to lower existing salaries.

JurisdictionPublisherPay Cut Prohibition
MassachusettsThe Commonwealth of Massachusetts General CourtShall not reduce wages of any employee solely to comply
Oregon Oregon Bureau of Labor and IndustriesMay not cut an employee's pay to make it equal with other employees' pay

Today, store the work comparison and the compensation rationale together in the hiring file. This record should clearly state why the new hire's compensation differs from comparable roles, if it does. Avoid using prior salary or proposed pay cuts as the primary justification for the offer amount. The documentation must stand on the basis of the work and the applicable jurisdiction's rules for equal compensation. If a difference exists, the file should show the specific, verifiable reason for that difference, independent of any adjustment to other employees' pay.

Related guides: Check 4 state minimum wages before the hourly offer · Check 4 duty tests before you write a salaried offer · State overtime rules from 4 pages before the offer.

FAQ: reviewing compensation before the offer

How do I review offer pay equity before approval?

Compare the actual work and compensation components, then check the proposed differences against the applicable jurisdiction's requirements. You must also ensure that any compensation rationale does not rely on prohibited salary history or corrective pay cuts.

Does equal pay coverage apply if my business has only one employee?

Yes, the U.S. Equal Employment Opportunity Commission states that you are covered by the law requiring equal pay for equal work if you have at least one employee.

Can a job title alone establish comparable work in Massachusetts?

No, The Commonwealth of Massachusetts General Court says a job title alone does not establish comparable work, so you must examine the actual duties and conditions rather than relying on titles.

Can previous salary defend a Massachusetts pay difference?

No. Under The Commonwealth of Massachusetts General Court, prior pay is not a defense to an action, so remove it from the justification.

Can an Oregon employer cut another employee's pay to equalize compensation?

No, Oregon Bureau of Labor and Industries states that employers may not cut an employee's pay to make it equal with other employees' pay.

Sources