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OFCCP Cracks Down on Compensation Practices

Posted by Jen Dewar on Aug 21, 2015 4:10:49 AM

In Recruitment Compliance and Operations

We've written quite a bit recently about compensation, but primarily as a means of talent attraction and retention. But what about your legal (and moral) obligation to provide fair compensation practices?

Any company doing business with the federal government may not, "discriminate in employment on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, disability or status as a protected veteran." And that applies to compensation practices - not just hiring practices.

Evaluating your Compensation Practices

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Earlier this month, the OFCCP announced a wage discrimination settlement after a federal contractor was found to have underpaid some female and African American workers. The company denied liability, but agreed to resolve the alleged violations through back pay and an evaluation of how various business practices affect compensation. These include:

  • promotion decisions
  • performance evaluation ratings
  • procedures for assigning work
  • training opportunities
  • leave policies
  • assigning applicants to jobs
  • limiting job transfers

For instance, if a female worker takes leave to care for her family, is she missing out on training opportunities or promotions that her male counterparts receive? Or, does limiting job transfers make it less likely that an African American worker will get a promotion because the role is in a location other than where they work?

While these practices may not be intended to be discriminatory, they can inadvertently have a negative effect on fair compensation and lifetime earning potential.

A qualified worker who is passed up for a promotion will earn less now, and may always fall behind their peers in terms of compensation due to percentage-based raises or new employment offers based on past compensation. The OFCCP is conducting compliance reviews of contractor's compensation practices to avoid this and ensure equal pay.

Improving your Compensation Practices

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To make sure you have fair compensation practices, take the time to develop a comprehensive and strategic compensation plan. Use data to create a salary range for each position or pay grade in your organization.

Workers who fit the minimum requirements will naturally be on the low end of the salary range, while workers with "nice-to-have" skills and qualifications can earn a higher salary. Revisit your compensation plan regularly to ensure that it's competitive and fair.

Also review your worker's compensation on a regular basis to ensure that it accounts for skills and qualifications they've gained over the course of their employment.

As compensation continues to increase as a means of attracting and closing talent, you don't want your current employees' compensation to fall behind. Doing so can be unfair, can hurt employee retention, and may cause legal and financial troubles with the OFCCP.

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Jen Dewar

Written by Jen Dewar

Jen is a marketing consultant in the HR and recruitment technology space, with a particular interest in lead generation. She has spent the past 10 years working with a wide variety of companies — from corporate marketing for large global organizations to startup marketing for both Identified and Bright.com, prior to their respective acquisitions. When she's not doing marketing, you can find Jen snowboarding in Tahoe, traveling abroad, or enjoying a night in with friends and a good bottle of wine. She's a graduate of UCSB with a degree in Socio-Economic and Political Global Studies.