OFCCP Mandates Self-Assessments on Internal Pay Equity

Companies that do business with the federal government have mostly taken a position of “see no evil, hear no evil” when it comes to internal pay equity. Their thinking has been that the government can’t accuse them of having poor processes in place for assessing internal pay equity if they don’t have any processes in the first place.

But that’s changed now. On June 16, the Office of Federal Contract Compliance Programs, the agency that monitors federal contractors for discrimination on the basis of gender and race, issued new standards for assessing “systemic compensation discrimination.”

This now means that when they are audited, the 16,000 U.S. companies that do business with the federal government have to provide information gathered from a compliance self-evaluation or else certify that they have such processes in place.

The regulations, which are effective immediately, mean that the companies don’t just have to have processes in place, but they need to have an executive, usually a senior HR person, attest to them, says Brian Levine, a principal with Mercer Human Resource Consulting.

Levine says the OFCCP came out with the rules because the agency was frustrated about not being able to make its claims regarding pay equity stick. By forcing companies to have a process in place, it makes the matter more clear-cut, he says.

Mercer is advising clients to adopt the OFCCP’s own methodology for assessing pay equity. The agency uses a statistical technique called multiple regression, which is “onerous,” to apply, Levine says. But by using this standard, companies can better anticipate any issues the OFCCP might come across during an audit, he says.

Levine doesn’t believe that companies should share their processes in the event of an audit. Instead, Mercer favors having an executive certify that processes are in place.

“We are telling clients not to share the information because there are many unresolved confidentiality and privileged information issues associated with sharing individual employees’ data,” he says.

—Jessica Marquez