Blogs / 2011 / August

Earlier this month, the Office of Federal Contract Compliance Programs (OFCCP) released an Advanced Notice of Proposed Rulemaking related to the development of a new compensation data collection tool. By way of background, one of the primary functions of the OFCCP is to enforce Executive Order 11246, which prohibits discriminatory employment practices among federal contractors. The intent of the new tool is to collect data that will allow the OFCCP to be more efficient in identifying potential problems of compensation discrimination.

While the tool will only impact employers that do business with the federal government (the OFCCP estimates about 200,000 companies fall under its jurisdiction), it could have broader implications over time. With the passage of the Lilly Ledbetter Fair Pay Act in 2009, ongoing Congressional activity regarding the Paycheck Fairness Act, and frequent support voiced by the Obama Administration for related legislation and enforcement, it’s likely that the prevalence of employee complaints will continue to rise. This means there will be a greater need for resources that agencies, like the Equal Employment Opportunity Commission and OFCCP, can use in conducting investigations and determining disparate impact.

One of the key issues cited by the Department of Labor and OFCCP as the rationale for the new tool is that sexism remains rampant in the U.S. By far the most popular statistic provided as evidence is that women earn only 77 cents for each dollar earned by a man. On its surface, this disparity is significant and, what’s more, census trends show very little improvement in the pay gap over the past 20 years. Unfortunately, this statistic is so all-encompassing that it lacks any true relevance and undermines the reality that discrimination continues, but at a much more discrete level.

The 23 percent gap is determined by comparing the median income among men 15 years-old and older working 50 or more weeks per year to that of women meeting the same criteria, as reported in the U.S. Census Bureau’s 2010 Current Population Survey. There are approximately 56,053,000 men and 43,217,000 women included in the calculation. Obviously, very different jobs are occupied by these 100 million U.S. workers. Not only do jobs differ dramatically, but differences exist among education, experience, age, location, work environment, industry, employee behaviors, skills, work schedules, mix of pay (bonuses, commissions, tips and the like are included with salary in determining income), and the list goes on. Various studies suggest that once such non-discriminatory variables are taken into consideration, the pay gap shrinks considerably; in some cases, to as little as 5 percent. Even then, it cannot be definitively proven that the remaining disparity is the result of gender differences and not some other, as yet untested, variable.

I have been involved in testing for pay discrimination for clients for several years. At a minimum, basic employee differences like job roles, education, experience, performance, tenure and location should be controlled for. And, though instances where a statistically significant variance among pay between males and females cannot be explained by typical acceptable factors are relatively uncommon, they do occur. It is for this reason that I would encourage you to look beyond the almost meaningless statistic based on census data and take a closer look at the specific pay practices within your own company, particularly among employees performing the same job. The efficacy of the OFCCP’s soon-to-be-developed tool and its influence remain to be seen, but nothing precludes employers from being proactive and diligent in reviewing employees’ pay to ensure compensation is fair and consistent.

Priya Kapila is a senior consultant at CBIZ Human Capital Services. Working in CBIZ’s St. Louis office, Kapila handles various elements of compensation plan design for diverse organizations, including structuring executive compensation packages, developing performance-based incentive programs, and designing comprehensive salary systems. For more information on Priya Kapila and CBIZ Human Capital Services, please call (314) 692-2249 or visit www.cbiz.com/hr/.