Compensation and Pay Equity Studies

A compensation study can be a valuable tool for an organization to gain a better understanding of factors affecting compensation in the organization's workforce and to respond to audits or inquiries by The Office of Federal Contract Compliance Programs (OFCCP) and the Equal Employment Opportunity Commission (EEOC). These agencies are paying increasing attention to gender- race- or ethnicity-based pay disparities. In addition, class action and individual lawsuits on pay issues can pose a risk to the organization.

In a pay equity analysis, employee compensation is first evaluated by similarly situated groups. Within these groups, determinations are made as to whether or not there are statistically significant differences within the groups by race, gender or ethnicity. If statistically significant differences are found, further analysis is done to evaluate whether or not non-discriminatory factors, such as variations in experience, seniority or education, explain the differences. Analyses may also be carried out evaluating smaller groups on a qualitative basis.

Differences are not limited to base compensation but can require evaluation of more complex factors, including but not limited to bonuses, commissions, overtime, and route assignments.

Many additional factors contribute to pay complexity. New employees in the same job may start at different rates based on factors such as length of experience, salary at a previous employer, education and other qualifications, competitiveness of the local job market at the time of hire, or regional differences. Some employees may be covered by a union contract. Others, such as salespeople, may be paid subject to a complex compensation plan including commission and other factors.

A comprehensive report will be prepared explaining the results of the pay equity study, and may be presented to the organization in a work session. Recommendations for changes will be discussed, and implications of various scenarios may be explored.




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