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A Step-by-Step Breakdown of the OFCCP Compensation Analysis

  • November 14, 2022

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A Step-by-Step Breakdown of the OFCCP Compensation Analysis

If your business requires an AAP, OFCCP compensation analysis is the part that examines and ensures that your employees are being fairly and equally paid for the same positions and responsibilities. To give you a better understanding of how this process works and what it involves, here is a step-by-step breakdown of the OFCCP compensation analysis process.

Classifying Employees Into SSEGs

The first task will always be to compile a comprehensive database of all employees and incumbents working for the employer or at a specific location. This process occurs for full-time, part-time, and temporary employees. Employees are then grouped into similarly situated employee groups, or SSEGs. These are based on the similarity in job content, skills and qualifications necessary for specific positions, and the responsibility assigned to a position or job within the company. This grouping process makes analyzing larger organizations more manageable, efficient, and thorough when the database can easily cross-reference the data of employees within the same or similar positions.

Creating a Data Set

Next, a data set of variables needs to be created based on factors that are the driving force behind a business’s pay decisions. This includes job responsibilities, demographics, pay levels, and more. To be more specific, some typical variables include:

  • Employee ID
  • The SSEG employees are in
  • Race/Ethnicity
  • Gender
  • Age/Date of Birth
  • Highest degree earned
  • Date of last degree earned
  • Military veteran experience
  • How long an employee has been with the company
  • How long an employee has been in their position
  • Part-time versus full-time employees
  • Job title
  • Current wage/Salary
  • Grade level or salary band classification
  • Job performance reviews
  • Prior experience
  • Employee location
  • Exempt vs. Nonexempt status

The reason that the analysis considers factors like age, gender, and ethnicity is that an employer’s own biases and assumptions cause many pay discrepancies. The OFCCP looks for these kinds of biases to catch and correct them. This creates a less hostile environment and ensures everyone has a level playing field in the workplace.

Evaluating Interactions

If a discrepancy is evident, the OFCCP will focus on the variables that correlate with the discrepancy. By this, we mean they’ll create new, more specific variables to further identify the source of the discrepancy. Using these new, more specific variables, the regression analysis will continue to see if the new variables have a significant impact on the data the OFCCP finds. If it doesn’t help find the source of the discrepancy, the OFCCP will redefine the variables and pursue another avenue.

Now that you have a step-by-step breakdown of the OFCCP compensation analysis, you can take steps ahead of time to ensure your own business is following the proper practices. Many discrepancies are not caused by malicious intent but rather simple errors caused by disorganization or a lack of records on your business’s inner workings. So it’s always good to check your own work.