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Offering Guidance to Federal Contractors, Post Rescission

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Mykkah Herner, MA, CCP, Compensation Consultant PayScale

Stephanie R Thomas ends her blog post, “Gone With The Wind (Your Guidance, That Is),” with a challenge: “How will you prepare?” She aptly points out that the rescission of the “Compensation Standards” and “Voluntary Guidelines” by the Office of Federal Contract Compliance Programs (OFCCP) leaves federal contractors with less guidance about how to comply with non-discrimination requirements outlined in Title VII. I’d like to take a moment to offer some suggestions.

But First, What’s The Scoop?
The government has decided that it wants to ensure non-discrimination in pay practices across the board—essentially for all groups protected by Title VII of the Civil Rights Act of 1964. While the “Compensation Standards” and “Voluntary Guidelines” prescribed a way of ensuring fair payment in some cases, they precluded the ability for the OFCCP to investigate the extent of non-discrimination across all protected groups. The Standards and Guidelines gave federal contractors a set of behaviors to follow, but didn’t necessarily get at the root of the issue. Now, federal contractors are still expected to practice non-discrimination in compensation practices, per Executive Order 11246. What’s different is that they are no longer prescribing the way to accomplish that.

Don’t Panic
It may be a good thing to have more flexibility in how you accomplish your self-evaluation of your pay practices, and in how you set up your comp plan and strategy to be non-discriminatory.

I’ve said before that, in a competitive global market, companies need to have the flexibility to develop their own compensation strategies and structures. In many ways, the Standards and Guidelines tied the hands of strategic, forward-thinking, non-discriminatory compensation professionals.

After developing your own clear guidelines, you may find that your compensation plan has the ability to be much more strategic—affording you the ability to pay-for-performance and get the best return on your compensation investment.

Build a Pay Structure
Building a clear base-pay compensation structure is critical to ensuring and *demonstrating* non-discrimination.

  • Create ranges for all of your positions. Assign your positions to those ranges. Pay your employees within range. It sounds simple, but it can be tough to comply once your pay decisions are influenced by managers.
  • Train your managers about the importance of paying according to your pay structure both for internal equity and for legal compliance.
  • Consider range width as a factor for demonstrating compliance when you develop your structure. It’s easier to show non-discrimination with narrower ranges where variability in pay is smaller.
  • Create a clear policy around if, when, and how employees progress through the ranges. For example, employees who are new to the company will come in between 0 and 10% range penetration. Employees must meet x, y, and z criteria to get an increase of up to a certain percentage. Detail your promotion policy explicitly and follow it: employees being promoted will be promoted to at least p% range penetration or receive a q% increase, whichever is lower.

Track Your Pay Practices
Finally, it will become critical to track your pay practices diligently—as you likely already are.

  • Be able to show a history of compensation by employee and by job title.
  • Use clear pay analytics to identify and correct any pay inequity issues immediately. In PayScale’s Insight software, there are a number of analytics that can automate and support this process:
    • Employee pay to market report shows you how current your employee pay is relative to your labor market.
    • Employee pay to ranges report is especially helpful in analyzing various cuts of data: EEO category, gender, Job, Department, Division, and Location. Having a tool that will show you – at a glance – how your employees are performing is critical to maintaining compliance.
    • Disparate Pay Report shows you the difference between the lowest and highest paid employees in each position. Again, it provides another way of looking at the information so that you can identify the issues immediately and course-correct.

However you decide to proceed, don’t be afraid to ask for help. Compliance is no laughing matter. After all, as they say: it only takes one…

 

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  • Allocate raises. PayScale Insight allows you to allocate raises based on employee performance and labor budget.
  • Attract talent. Price jobs based on your local market and competition.
  • Retain employees. Get pay right and show them how you did it. Your employees will be more satisfied to stay.
  • Drive performance. Get their salary right so they can focus on doing a good job.
  • Be confident. With know-how to talk about comp with anyone.

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