Benefits and Compensation

You Found Compensation ‘Disparities,’ Now What?

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 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. 

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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 

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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?

 One of the areas where most employers fall down is child labor. It’s easy to run afoul of the laws: 

  • Young workers are eager to show what they can do, so they want to operate the forbidden equipment.
  • They are eager to make money, so they want to work the forbidden hours.
  • Supervisors want to get the work done, so they may ignore the rules (if they even know them). 

That’s a dangerous combination, especially if you’re not exactly sure what the laws—and you have to check both federal and state—mandate. 

Fortunately there’s a new BLR Focus report on Child Labor Laws that details both federal and state law on the topic. Instantly download this report and you’ll know for sure who’s allow to work, at what, and for how long. 

Download Now or get more information here.