What is a Pay Equity Audit?

To further the Office of Federal Contract Compliance Programs (OFCCP)’s commitment to ensuring pay equity in the workplace, the OFCCP recently issued Directive 2022-01, which provides clarity on how the OFCCP will hold federal contractors and subcontractors accountable for avoiding potential pay inequities. Under the directive, the OFCCP explains how it will review existing contractors’ compliance with internal pay equity audit requirements and the submission of their assessment results to the OFCCP. 

Here, we provide a basic overview of pay equity and best practices for how to reduce the risks that can potentially jeopardize compliance and result in costly violations.

What is pay equity?

Pay equity means that all employees are paid equally when performing similar jobs, regardless of race, gender, ethnicity, or other protected classes. Designed to eliminate wage disparities and promote fair compensation for all groups of employees, pay equity encompasses base pay, bonuses, promotions, overtime, and employee benefits.

A desk audit is a standard evaluation practice conducted by the OFCCP of a federal contractor or subcontractor. As they review a contractor's Affirmative Action Plan (AAP) and supporting data, the OFCCP can initiate a pay equity audit requesting additional information if disparities are found. 

Disparities include signs of pay discrimination, promotions or assignment discrimination, and any patterns that unlawfully drive employees into lower-paid positions based on gender, ethnicity, or race. 

Requests for additional information may include:

  • Follow-up interviews

  • Supplementary compensation data

  • Employee prior experience or educational background

  • The contractor's pay equity audit

  • Additional data not included in Item 19 compensation and workforce submission 

 The OFCCP may also request pay equity model statistics and variables used as part of the analysis and information on the frequency of pay equity audits, communication to management, and how disparities were resolved. 

Pay Equity Best Practices

Federal contractors and subcontractors should evaluate their own compensation processes, understand the regulations, and keep up to date on the current changes that may affect them.

Contractors should:

  • Conduct a pay equity analysis by job title

  • Identify any gender-based pay discrepancies

  • Review any variant pay discrepancies within all employee groups

  • Promote pay transparency for starting salaries, raises, and promotions

  • Develop and document a pay equity compensation plan and implementation strategy

By building a great pay equity plan, you can see better retention, employee engagement, and improved value of your brand as an employer. It will also reduce the potential risk of legal action and damage to your organization's reputation.

Pay Equity Audit Summary 

This complex process varies considerably based on the contractor and the OFCCP’s findings during the evaluation. If you’re a federal contractor or subcontractor looking for a robust compliance solution, JobTarget’s OFCCP offerings can automate much of the compliance process and provide integral support during an audit.

Disclaimer: This presentation is for general informational purposes only and is not intended to offer legal advice or to guarantee regulatory or legal compliance. Consult with the appropriate legal or compliance professional.  

Learn More on OFCCP Compliance with our 101 Guide

The JobTarget OFCCP Guide will help you understand:

  • What is the OFCCP  

  • What OFCCP regulations apply to you

  • What key things your organization must comply with 

  • How to minimize your compliance risks 

  • How to prepare for a possible audit

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