Compensation / Pay Equity Analysis

With the enactment of the Lilly Ledbetter Fair Pay Act, it is important for you to be aware of the affect of your pay practices on women, people of color, and individual with disabilities.  Since both OFCCP and EEOC have the authority to investigate compensation systems and practices from the following legislations, all organizations should make compensation reviews a priority.

• Executive Order 11246 - requires contractors to review their "compensation system(s) to determine whether there is gender, race, or ethnicity-based disparities".
• Title VII of the Civil Rights Act - "it is an unlawful practice for an employer to fail or refuse to hire or discharge any individual or otherwise discriminate with respect to compensation because of such individual's race, color, religion, sex, or national origin."
• The Americans with Disabilities Act - "prohibits private employers, state and local governments, employment agencies and labor unions from discriminating against a qualified individual on the basis of disability in regard to job application procedures, the hiring, advance, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment."

According to the U.S. Census statistics released in August 2007, women’s earnings in 2006 were 76.9% of men’s earnings.  This wage gap showed no improvement from the prior year.  Based on the median earnings of full-time, year-round workers, women’s earnings were $32,515 compared to the men’s earnings of $42,261.  Median earnings for women of color are even lower than earnings for men as a whole. 

    Latino women - $25,198 (59.6% of men’s earnings)
    African American women - $30,352 (71.8% of men’s earnings)
    Asian American women - $39,313 (93.0% of men’s earnings)

June 2008, U.S. Census reported that women veterans have higher salaries than non-veterans in 2005, but they also worked more hours in a week and more weeks out of the year.  Women veterans earned $32,217 compared with $27,272 for women civilians with no military experience.

To properly analyze your pay practices, it is important to identify the elements that influence wages, salary, and other types of compensation.  These may include:

• Tenure with the company
• Length of time in position
• Related skills and experience
• Education, certifications, licenses
• Performance
• Grade or pay level
• Scope of assignment

Following OFCCP requirements Workplace Dynamics will conduct several analyses of your company’s compensation practices.   Our pay equity analysis involves the following three steps, as necessary.

• Step 1 - identifies areas of potential liability using data that is available from your HRIS system, similar to the data pulled to prepare the Affirmative Action Plan.  By using pay, gender, race, and any job factor that is easily available (such as date of hire/tenure), this analysis reveals any areas (either job group, pay grade, job title, or similarly situated employee groups – SSEGs) of potential liability that exist before considering any additional job factors such as education or outside experience.  This Preliminary Analysis is conducted using the $1,000 and 5% difference in salaries and will identify the need to conduct either the cohort or multiple regression analysis where statistical significance exists.
• Step 2 – Where potential pay problems have been identified in Step 1, further research using Multiple Regression or Cohort Analysis will be conducted.  Multiple Regression is a statistical tool that allows you to examine how multiple independent variables (tenure, time in position, time in grade, etc) are related to a dependent variable (annualized earnings).  This test is used for larger groups with at least 30 incumbents, 5 protected members and 5 non-protected members.  Once you have identified how these multiple variables relate to your dependent variable, you can take information about all of the independent variables and use it to make much more powerful and accurate predictions about why things are the way they are.  The following additional analyses may be conducted to support the cohort or multiple regression analyses: Correlation Matrix, Statistical Cohort Analysis, or Multi-Factor Analysis.
• Step 3 – Summarizes the above analyses in a manner that is understandable to your company.  Individuals flagged for comparison will be identified. Each analysis will be reviewed and recommendations will be provided.