Employers can say "Catch me if you can," but they had better be ready to explain their decisions when the DOL says 'I caught you," says consultant Jonna Contacos-Saywer.

"There is a dramatic increase in wage and hour lawsuits," says Contacos-Sawyer (and the recent Wal-Mart decision probably means an even greater increase). At her presentation at the recent World at Work Total Rewards Conference in San Diego, Contacos-Sawyer, president of HR Consultants, Inc., was joined by colleagues Polly Wright and Judith Mickey.

What About DOL's 'Frightening' New App?

What about the DOL's new app that allows employees to keep their own time records? Although it might seem to be a threat, Contacos-Sawyer says that it's not likely to have much effect. The typical HR manager's response she gets is: "I can't even get employees to fill out timesheets at work."

You can prevail in lawsuits, says Wright, but to do so, you must:

  • Develop and document a sound compensation system with careful job analysis and thorough job evaluation
  • Document movement through the compensation system
  • Analyze the results of the compensation system

Developing and Documenting a Sound Compensation System

Job analysis is a systematic process for gathering, documenting, and analyzing information in order to describe jobs. It is the fundamental piece that underlies the compensation system. You do job analysis, says Wright, for several reasons:

  • Compliance
  • Employee Relations
  • Performance Appraisals
  • Compensation
  • Training and Development
  • Communication
  • Health and Safety
  • Recruiting and selection
  • HR planning

The job analysis:

  • Focuses on work behaviors, tasks, and outcomes and their relative importance and relationship with other jobs
  • Is conducted for the job, not the person doing the job. (What typically happens, Wright says, is that the incumbent has a BA, so that becomes a requirement when it is not really necessary to do the job.)
  • Identifies:
    • Job Content — activities performed in the job
    • Job Specifications — qualifications and skills required
    • Working Conditions — environment where work is performed
    • Performance Criteria — desired behaviors and results

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Factors to Consider

Wright suggests that compensation specialists consider several factors in planning their job analyses:

  • Total Job Titles. Remember that employees often have a title that they use that is different from their official title.
  • Total Incumbents. How many are in each job title
  • Timeline for doing the analysis (Be generous, says Wright)
  • Culture. What will work with your organization?

Methods for Analysis

  • HR Department development
  • Questionnaires
  • Face-to-Face Interviews
  • Focus Groups

You must follow a systematic process to determine the relative worth of each job within your organization, Wright says. DOL's Job Evaluation Method is based on four factors:

  • Knowledge
  • Job controls
  • Contacts
  • Physical environment

Wright notes that the federal Department of Labor has a good resource on job evaluation: http://www.bls.gov/ncs/ocs/sp/ncbr0004.pdf

Key Elements of Pay Structure Documentation

Your documentation of your basic pay policies should contain:

Base Pay Policy

  • Comparables. To whom do you compare yourselves?
  • Market competitiveness. How do you judge?
  • Pay structure. What's the system? You will have to explain.
  • Movement through pay structure. How are decision made?
  • Pay structure shifts. How often are they made and on what basis?

Variable Pay Policy. What variable pay programs do you have and how do they work?
Job Descriptions. Up-to-date job descriptions are of course an important part of your pay structure documentation.
Job Evaluation Method. You should be prepared to explain your job evaluation method, Wright says.

These factors above are the foundational pieces that let you explain "Why Sally makes $85,000," says Wright.

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Compliance and Defensibility

In addition, consider the following compliance issues, Wright says:

  • Pay Discrimination
  • FLSA Exemptions
  • Disparate Impact
  • ADAAA / FMLA / Worker's Compensation

In tomorrow's Advisor, more on what to do if you find compensation disparities, plus an introduction to a collection of the most-needed HR policies.

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