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equal pay guidelinesThe issue of a wage gap between genders and minorities continues to pick up steam. Fair pay legislation that fundamentally changes how equal pay claims are analyzed and creates easier access for employees to file equal pay lawsuits has already been passed in California and New York, with the rest of the country preparing to follow suit.

Both the Equal Employment Opportunity Commission (EEOC) and Office of Federal Contract Compliance Programs (OFCCP) have committed to making regulatory strides related to pay equity for women and minorities.

In fact, the EEOC has proposed to collect employee pay data on the Employer Information Pay Report (EEO-1) from companies with 100 or more employees. This report would have to be filed by March 31, 2018.

As the EEOC and OFCCP continue to work on new regulations that promote pay equity, employers are advised to be proactive to assure they are eliminating bias in how they approach compensation.

Here are some compliance guidelines to help you ensure pay decisions are equitable, strengthen your ability to defend pay decisions, and help you prepare for potential changes to the Employer Information Pay Report (EEO-1).

3 Equal Pay Guidelines

1. Review and Update All Existing Pay Policies

Conduct an audit of all existing written and systemic pay policies at your company to ensure that they promote equity. Convey the message in your employee handbook that you will comply with all applicable laws concerning pay equity and transparency.

Pay transparency regulations went into effect January 11, 2016, so be sure to update your handbook with the nondiscrimination statement prescribed by OFCCP and remove any language barring employees from disclosing their compensation. You should also clearly communicate an avenue for employees to report pay inequality without punishment.

Finally, you should consider implementing written policies for bonuses and pay increases, so you can reign in subjectivity and document how objective factors influence pay increases.

pay equity guidelines

2. Consider Implementing Standard Pay Ranges or Guidelines for Each Position or Classification

The guidelines for pay should be based around quantifiable and objective factors—such as experience or education level—and should outline the relevant factors that management may consider when deciding pay rates. Be sure to account for all employee compensation, including bonuses and benefits, when reviewing employee pay packages.

Unless you are prepared to defend the absence of gender or racial bias in an employee’s past compensation, do not base an employee’s starting pay around an employee’s salary history. Instead, you should use market data as a benchmark for what you should be paying an employee for their position (be sure to review this benchmark data annually to account for inflation).

3. Carefully Document the Bona Fide Reasons for Pay Differentials in Similar Jobs

Develop written documentation outlining the compensation philosophy, processes for determining pay ranges, and guidelines for making compensation decisions. These guidelines should include starting pay, merit pay increases, personnel actions such as promotions, and variable pay such as bonuses.

You should be ready to identify the factors your company uses to influence compensation. When making pay decisions in the future, you should be sure to carefully document the bona fide reasons for the pay change, including the decision makers involved, the basis for any objective factors that were considered, the reason any subjective factors were considered, and any other basis for the pay decision that was made.

Don’t Let the Proposed EEO-1 Changes Catch You Off Guard

The EEOC’s proposed EEO-1 changes haven’t been finalized yet, but from all indications, the new rules will go into effect very quickly—leaving employers to be prepared to file next year.

Check back next week to learn more equal pay guidelines to help ensure your compliance with the proposed changes or download the eBook, New Pay Equity Legislation Compliance Checklist.

EPAY Systems’ seamless human capital management system can help you manage the cumbersome reporting requirements associated with the proposed EEO-1 changes. Beyond reducing your HR burden, EPAY’s human capital management technology can ease EEO-1 reporting by pulling data within the Bureau of Labor Statistic pay bands, quickly producing W-2 earnings for any 12-month period, and accurately tracking all employee hours. Contact us to learn more.