OFCCP Cracks Down on 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

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

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.