December 15, 2015

Is “Total Pay” a Useful Analysis?

With OFCCP regularly requesting multiple forms of compensation during compliance audits, we revisit the difference between EEO compliance evaluations of base pay versus other compensation metrics. An individual’s base pay is a function of many different compensation decisions spanning multiple years, decision-makers, market characteristics, life circumstances, and career decisions. Effectively modeling such complex phenomena to appropriately evaluate whether EEO issues exist, requires a fairly sophisticated understanding of historical data and regression analyses. Further, the data needed to fully account for legitimate differences in pay are often not available (or, at least, not easily obtained in electronic format). In comparison, such forms of compensation as year-end bonus, spot bonus, and profit sharing are discrete amounts awarded in response to recent individual or company performance levels. Evaluating the EEO compliance of such compensation forms is relatively straightforward, as data availability is not usually a problem and the factors that influence distribution of awards are typically limited. Given the very different analytic scenarios presented by analysis of base pay versus other forms of compensation, we continue to urge our clients to separate compensation types in audit submissions and to communicate clearly the different reasons for awards. Given that “total pay” combines components that are the result of many decisions (i.e., base pay) and components that are the result of a single decision (e.g., annual bonus, spot bonus), caution must be taken when analyzing and interpreting a total pay composite.

By Kayo Sady, Senior Consultant and Mike Aamodt, Principal Consultant at DCI Consulting Group

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