Employee Compensation

Obama Administration to Keep a Keen Eye on Employer Pay Practices

Jan 9, 2015

An issue that was a priority of the Obama Administration in 2014 is certain to remain one this year: employer compensation practices. Earlier this week, SHRM filed comments with the Office of Federal Contract Compliance Programs (OFCCP) on its recently announced proposed rule that relates to collecting and publishing employer compensation data for federal contractors.

SHRM strongly supports nondiscrimination in compensation and believes that compensation decisions should be based on an individual’s qualification and ability to perform a job. The OFCCP’s rule, however, is misguided in its attempt to address pay disparities through new and expansive data collection.

In particular, SHRM is concerned with the following aspects of the proposed rule and noted them in its submittal to the agency:

  • The rule indicates that the OFCCP will publish the compensation data of federal contractors in an aggregated format, perhaps in a Web-based, publicly available database. SHRM expressed grave concern about this proposal and stressed the need to protect federal contractors’ highly sensitive and proprietary information from inappropriate disclosure.
  • The agency has proposed collection of total W-2 wage information. This proposal is misplaced for a number of reasons, including the fact that W-2 wage earnings are impacted by a host of decisions made by wage earners themselves, such as decisions about retirement savings. In addition, other nondiscriminatory variables may impact pay, including shift differentials, bonuses, commissions and overtime compensation.
  • The agency would require contractors to report total hours worked by race/ethnicity and gender in each EEO-1 job category, allowing contactors to report actual hours for exempt employees or to assume 2,080 hours for full-time exempt employees. SHRM’s comment points out that 1) the agency mistakenly concludes that contractors will be able to provide actual hours worked for exempt employees and 2) not all employers adopt a 40-hour workweek, making the use of a single, default hour-worked figure for all exempt employees meaningless.

In addition to highlighting problems with the specifics of the proposed data collection, SHRM’s comment challenges the OFCCP’s belief that these “Equal Pay Reports” will help the agency direct its enforcement resources. As SHRM’s comment states, “Our members’ experiences with evaluating their own pay systems strongly imply that the use of aggregated compensation data is not an effective tool for identifying discriminatory pay practices, particularly in light of the limitations discussed above regarding the data points the OFCCP plans to collect.”​

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