The OFCCP’s recent Directive, issued on August 24, 2018, signals a move towards greater transparency in the compensation review process for contractors. With this new Directive, the OFCCP has rescinded former Obama-era guidance on compensation review, for a more open and transparent process. The OFCCP sent out 750 corporate scheduling announcement letters to contractors on September 7, 2018, so compliance reviews may be imminent for a number of employers.
Pay Analysis Groupings
The Directive sets out the OFCCP’s procedures for grouping similarly-situated employees for statistical compensation analysis. The OFCCP explains that it analyzes compensation for similarly-situated employees by:
- developing pay analysis groupings (PAGs); and
- statistically controlling for further structural differences within the PAGs and individual employee characteristics, such as tenure, prior experience, education and grade level.
In a significant change, the OFCCP will use the contractor’s compensation hierarchy and job structure to run its analysis, provided that:
- the structure is reasonable,
- the OFCCP can verify the structure as reflected in the contractor’s compensation policies, and
- the groupings are of sufficient size to conduct a meaningful statistical analysis.
If the contractor does not provide information about its compensation system, the OFCCP will as a default use either EEO-1 or AAP job groups. The OFCCP will “control further for sub-job groupings, functions, units, or titles,” as well as “tenure, full-time status” and other factors as appropriate.
Statistical Methodology and Modeling
The Directive provides an overview of the OFCCP’s methodology for statistical analysis of compensation data during the