Employers should take heed of what OFCCP is requesting in the updated Item 19 of the compliance review scheduling letter. The agency is now requesting compensation data at the individual employee level.
As we have discussed elsewhere, the Office of Federal Contractor Compliance Programs (OFCCP) implemented a new scheduling letter on October 1, 2014. A summary of the new and revised itemized listing requests is available here. One of the most significant revisions is to what was Item 11 (now Item 19). Previously, employers were asked to submit aggregated compensation data for employees. Now, however, the OFCCP has expanded the scope of the request. Before submitting the requested data, employers should review it in light of
the new directives.
What in particular is the OFCCP requesting in Item 19?
- Employee-level base salary/wage rate data with typical hours worked each week
- Separate designation of other types of compensation earned such as overtime, commissions, geographic differentials, other incentives
- Employee characteristics such as demographic information, hire date, job title, job grade, job band and job group.
Item 19 goes further in giving each company the option to submit additional data fields that are relevant to your compensation system such as;
- Department/Function area
- Education level and field of study
- Previous relevant experience
- Location of the employee
- Other factors that may be unique to your compensation system.
What options do employers have?
While the OFCCP is requesting more in-depth information on compensation than it has in the past, the request also allows the employer to tailor the data submission to align with the organization’s particular compensation philosophy. This is an opportunity for employers to control the information that is submitted to the OFCCP and provide more relevant data in response to the agency’s request. As an example, some companies consider education level for particular jobs (think engineering) while other jobs will not require specific educational attainment (think entry-level machinist). The submission of compensation data for an engineering centered company should contain the education level and field of study because engineers differ in their compensation prospects based on the field of engineering that they are in. In contrast, compensation for entry-level machinists is more likely to be based on previous experience and may include a substantial level of overtime or shift differential pay due to their production requirements.
What will the OFCCP do with this data?
Employee level data such as these can be used in a variety of statistical tests. As before, the OFCCP can perform a comparison of average compensation by the job group, job title, job grade, etc. for the various demographic groups but OFCCP can also prepare analyses of very small groups of employees by looking at one employee compared to their grouping (cohort analysis) as well as statistically compare compensation for large groups (regression analyses). We have seen the OFCCP do both in recent months.
How can employers prepare?
At a minimum review compensation data for inconsistencies in compensation amounts, hours worked, hire dates, and employee demographics. Prepare preliminary statistical analyses of your compensation outcomes by job title, job grade, job group or other relevant grouping for your company using a statistical tool such as a comparison of average compensation or multiple regression analysis. If the analysis uncovers statistically significant results for any demographic group, research the differences in the compensation of the employees in preparation for answering questions from the OFCCP.
Unsure about what a compensation analysis entails? Learn more about how ERS Group approaches proactive compensation analyses here.