3 Steps to Employee Compensation Compliance
Equal pay for equal work: It’s the principal at the core of pay legislation in the United States, and one that should be at the core of your organization’s compensation policy. But how can you ensure that you’re in compliance?
1. Know the Laws
Decisions about employee compensation are governed in part by the Equal Pay Act, which aims to stop gender discrimination. This act measures four compensable factors, enforced by The Equal Opportunity Commission, that determine the nature of a job:
- Working conditions
In addition to the Equal Pay Act, employers need to comply with The Lilly Ledbetter Fair Pay Act, (2009) which extended a statute of limitations for compensation complaints. This act goes beyond the Equal Pay Act by adding protected classes, such as race and national origin.
2. Document Your Pay Decisions
Protect Yourself With A Proactive Approach
As with many aspects of Human Resources, Employers ensure compliance by thoroughly documenting pay decisions. A formalized, fully-documented approach encourages legal, balanced behavior; it also arms an organization in the event of a legal dispute.
Effective pay documentation should include:
- Details of what an employer chose to pay an employee
- The performance rating an employer gave an employee that led to a particular pay decision
- Other factors that affect income, such as the sales territory given to an employee. For instance, did it have a lower value than the territory given to another employee?
3. Take No Chances – Get Help From A Consultant
There are typically three reasons an organization may take a third step towards compensation compliance, and seek a professional compensation analysis from a consultant:
1. As part of human resources best practice, an employer wants to know whether internal pay is equal for men and women, and for different races.
2. The compensation analysis is included in the purchase of an Affirmative Action Plan human resource consulting service.
3. The compensation analysis is part of a Compensation Plan Design human resource consulting service.
In all three cases, a compensation analysis begins with a market analysis, giving the consultant a benchmark to assess the employers pay structure. The consultant examines:
- All aspects of internal pay equity
- External pay among competitors, for workers in the equal roles, using national benchmarks
An HR consultant will then use a point factoring system, awarded points for certain skills. The totaled amount establishes a hierarchy of jobs within an organization.
Ultimately, an HR consultant produces a valuable, objective report for an employer that highlights areas of their compensation system that risk non-compliance or require attention.