In yesterday’s Advisor, we looked at the DOL’s increasing focus on compensation issues and defending your system against attack. Today, more on defense, plus an introduction to an extraordinary collection of policies.
It’s important to recognize that you need to be able to document an employee’s compensation history, not just their current salary, says consultant Judith Mickey. Look at the employment lifecycle:
- Start rates (identify overqualified applicants)
- Pay increase documentation
- Pay decrease documentation
- Wage freezes, etc.
Mickey, of HR Consultants, Inc., offered her comments came at the recent World at Work Total Rewards Conference in San Diego. She was joined by colleagues Polly Wright and Jonna Contacos-Sawyer.
The DOL is committed to digging into your compensation decisions. There’s no more “we usually do it this way,” Mickey says. “Look at the DOL’s 2011-2016 plan,” she adds. “It won’t put you to sleep — you won’t be able to sleep.”
Consistency is critical, but how do you ensure it, for example, in starting salary negotiations?
Building Consistency
Here’s what to do, Mickey says:
- Decision-makers. Start by identifying the decision makers and developing a framework for them to work within
- Training. Then train, train, train, says Mickey. All decision makers need training to get consistent decisions across the board.
- Accountability. Build accountability for compensation decisions into managers and supervisor’s job descriptions.
- Exceptions. Yes, you are going to make exceptions, but when you do, be ready to show documented, job-related reasons to support your decision.
BLR’s SmartPolicies gives you 350 HR policies, prewritten for you, ready to customize or use as is. Click here to examine it at no cost or risk.
Analyze the Results of the Compensation System
First of all, says Mickey, before planning and doing analysis, check with your attorney about privilege. He or she may have specific instructions for you to keep the results of your analysis privileged.
Where and how do you track compensation?
- Excel spreadsheet with Analysis ToolPack.
- Compensation software
- HRIS systems
Mickey particularly recommends that employers try the free Analysis ToolPack add-on for Excel spreadsheets. It provides some more advanced statistical analysis tools that are not installed by default. Whatever system you use for analysis, she says, remember that your output will only be as good as what you put in and as good as the system can put out.
Some of the methods Mickey recommends:
- Regression Analysis
- FLSA Audits
- Adverse Impact Analysis
- Job Title Average Rate Comparisons
You’ve Found Disparity, Now What?
If you do discover disparity in your pay, it’s best to begin to reduce your exposure. You want to be able to show you made a good faith effort. Start by identifying the most egregious areas. You may consider:
- Current pay adjustment
- Back pay
- Interest
- Distribute equally to all involved employees
- Distribute equally to all lowest paid members of impacted group
- Distribute on a proportion basis with more going to the lowest paid than highest paid
There’s no single right way, says Mickey. You know your company. And always remember that you have the option of doing nothing.
The Two Big Questions
Finally, says Mickey, there are two key questions that you need to be able to answer:
- Can you recreate, through documented evidence, why someone is paid what they are currently paid?
- Can you defend, through documented evidence, why a position is classified as exempt?
It’s critical to have detailed policies concerning compensation. Of course, there are a lot of critical policies. Our editors estimate that for most companies, there are 50 or so policies that need regular updating (or maybe need to be written). It’s easy to let it slide, but you can’t afford to—your policies are your only hope for consistent and compliant management that avoids lawsuits.
Fortunately, BLR’s editors have done most of the work for you in their extraordinary program called SmartPolicies.
Don’t struggle with those policies! We’ve already written them for you, and at less than $1 each. Inspect BLR’s SmartPolicies at no cost or risk.
SmartPolicies’ expert authors have already worked through the critical issues on some 100 policy topics and have prewritten the policies for you.
In all, SmartPolicies contains some 350 policies, arranged alphabetically from absenteeism and blogging to cell phone safety, EEO, voice mail, and workers’ compensation. What’s more, the CD format makes these policies easily customizable. Just add your company specifics or use as is.
Just as important, as regulations and court decisions clarify your responsibilities on workplace issues, the policies are updated—or new ones are added—as needed, every quarter, as a standard part of the program.
SmartPolicies is available to HR Daily Advisor subscribers on a 30-day evaluation basis at no cost or risk … even for return postage. If you’d like to have a look at it, let us know, and we’ll be happy to arrange it.
If you find a disparity, deciding how to remedy it is one of those “measure twice, cut once” sort of situations. You may also wish to talk to employment counsel before taking action. Once the genie is out of the bottle, you won’t be able to put it back again, so be careful.
Though in a DOL audit you “might” be required to pay interest besides back pay, though the cases of such are very rare, for Mickey to recommend that as a reasonable remedy is naive in my opinion. Good faith efforts of a written program to remedy the situation including a first step would most likely be a defensable position should a firm be audited.
I find some of BLR’s recommendations to lead the less informed HR professionals down impractical roads.