Auditing Your Pay Practices to Ensure EEOC Compliance

HR Resource
May 17, 2013 — 2,739 views  
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The EEOC or Equal Employment Opportunity Commission has come up with a pilot program that helps to audit the pay practice of employers. This program was put forward on the basis of the recommendations made by the National Equal Pay Enforcement Task Force and the OFCCP. OFCCP stands for Office of Federal Contract Compliance Programs.

The program will help you to identify, analyze, and eliminate the disparities surrounding the compensation process in your organization. Usually the EEOC launches investigations only if a discrimination case is filed. But according to the pilot program, the EEOC is conducting a proactive audit of the pay practices of the employer. The agency targets employers for discrimination and starts off with a compensation audit of employee pay practices.

The Audit Process

The audit will start with a meeting between the employee and the EEOC officials. The EEOC will collect information regarding the employer’s payment practices during the meeting. This will include background information on the pay systems that are used, the review and compensation procedures, the management and retention of compensation data, and other similar information. The employer will then present the required data which is asked for to the EEOC. The EEOC will audit this data and in case any violations are found, penalties will be imposed on the employer.

Conduct Compensation Review

To streamline the compensation practices in your organization, you can conduct a compensation review. You can even take the help of a legal counsel to conduct the review. Perform statistical analysis of your compensation data by using consultants from outside your organization. Determine which areas of your organization need to be studied. This will include categories like lines of businesses, departments, job groups, locations, and others.

The compensation will also be of many types like hourly wages, annual wages, incentives, overtime, variable pay, and total compensation. To optimize your compensation practices, you should also decide what type of compensation has to be studied. The grouping of employees into various sectors, like those who perform similar work, those who occupy positions which have similar levels of responsibility, and those who occupy positions which require similar skill levels, is also necessary.

Conduct Preventive Proactive Pay Audit

In order to ensure that your company meets the requirements as set forward by the EEOC and the OFCCP, you will have to conduct a preventive pay equity audit. This can be done based on the data obtained from the compensation review. This audit will prevent the employers for incurring penalties for their pay practices. The audit also involves performing a pay equity analysis. A pay equity is the degree to which the actual pay of an employee matches the projected pay. Projected pay is the pay the employee thinks that he/she should get. High pay equity implies high employee satisfaction. At the same time low pay equity increases the chances for grievances, employee absenteeism, turnover, and strikes. At the end of the audit, the results should be evaluated based on the statistical significance or the practical significance of the data obtained.

Final Follow-up

Based on the preventive proactive pay audit, you can proceed with your follow-up investigations. The investigations can be done in a systemic way by providing individual attention to every employee. Finally chalk out the problematic areas and work on them so as to avoid disparities regarding employee payroll operations.

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