Offering Guidance to Federal Contractors, Post Recession

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.

Learn More About Our Compensation Software

GET A DEMO

 

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…