Money, money, money…mo-ney

by Terri Swain

OFCCP audits are focusing on compensation equity — specifically are there any inequities between males/females or minorities/white similarly situated employees in your organization?  Compensation is a slippery slope.  HR professionals recognize that there are many components to compensation level: education, seniority, performance, market conditions, predecessor companies, etc.  Unfortunately, the data that you need to support compensation decisions taking into account ALL RELEVANT FACTORS is rarely, if ever, in one system or place.  So how do you prepare for or defend yourself with compensation disparities that are not the result of race or gender?

  1. Add internal equity review as a part of your annual compensation cycle and require/coach/counsel managers to identify any inequities, determine the cause and have a plan for addressing them.
  2. Have a clear compensation philosophy — be able to articulate it and validate it.  If you pay for performance, make performance management systems meaningful and level within your organization and feel confident that performance ratings are relevant factors.  List your top performers and compare it to compensation — is it in line?  If you value education and compensate for it, do you capture educational level in your HRIS?
  3. In an OFCCP audit, assure that the auditor is comparing apples to apples.  Compensation analysis is typically done at the Job Group level by the OFCCP; however most organizations compensate at the Job Title or Salary Grade level.  Articulate this and ask for any inequities to be pointed at at the smallest level possible.  The auditor will often ask for “canned” data elements: seniority date, time in position, age, etc.  If you do not compensate based on the factors they request, only provide the data that will tell the story of how people are paid.  This is not being difficult, this is being accurate.

Compensation inequities can lead to *HUGE* OFCCP settlements — however more often than not, it’s not that the organization discriminated, it’s that the organization was not able to defend its compensation practices.