Why is pay transparency such a big deal?

My last few blogs have discussed compensation as part of the company’s employment-value proposition. The way you discuss pay – meaning pay decisions and pay strategies around cost of living adjustments, merit increase, promotions, and recruiting – the transparency of this information is a piece of your company’s culture puzzle.

And now it’s part of the law.

Pay transparency is a recent step by the Office of Federal Contract Compliance Programs, OFCCP (http://www.dol.gov/ofccp) to ensure that employees understand how their pay is determined and how does one person’s pay compare to others.

Why is this happening? 

Equal pay has received press for many years since the passing of the Equal Pay Act of 1963. See comments from The White House; Lilly Ledbetter Fair Pay Restoration Act.

No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex

– Equal Pay Act of 1963

The OFCCP has long been interested in looking at creating diverse work forces at companies. As time has gone on it’s followed along the course of action with other federal laws to identify equal pay as an important factor among protected classes. 

On September 10, 2015, the OFCCP released its final “Pay Transparency” Rule designed to promote pay transparency and eliminate the wage gap between females and males and minorities and non-minorities. OFCCP believes the rule “provides a critical tool to encourage pay transparency, so workers have a potential way of discovering violations of equal pay laws and can seek appropriate remedies.”

A culture of secrecy prevents them from finding out if they are being discriminated against in time to act on it.      – OFCCP Rule on Pay Transparency

Read the full regulations here: http://www.dol.gov/ofccp/PayTransparency.html

What does this mean for you? 

At this time the rule applies to companies that must comply with OFCCP regulations and for those companies the rule goes into effect for any contract entered into on or after January 11, 2016. Those companies have to implement a number of processes to achieve compliance with the new rule. Email me for guidance on this topic!

Get ready, things are about to change

Even if your company does not have government contractor status or compliance requirements, there are things you can do to ensure you have pay transparency. File this in your mind as THINGS ARE ABOUT TO CHANGE:

When the OFCCP outlines a change for federal contractors, usually companies outside of that sector see changes too. Can you start being pro-active? Sure you can. Here are some ideas:

  • Evaluate your pay practices. Are they based on market data? How recent is that market data? Do you need a refresh on your approach?
  • Compare the people who sit in the same job title or department who have relatively similar job responsibilities and scope. Do you have job descriptions for these jobs? If not, write them and communicate the description to the employee.
  • For the same group of people, look at each person’s skills, experience and training. Are the pay differences between each person based on higher/lower skill sets? If not, consider making some changes.