Monday, April 27, 2009

It's Time to get Your Compensation House in Order

I went to a very informative SHRM-Atlanta presentation last week on "The Return of the Pay Discrimination Class Action - How Should Employers Evaluate Their Compensation Practices in the Wake of New Federal Laws" by Antonio Robinson, from Littler Law Firm. Robinson discussed the Lilly Ledbetter Act and the Paycheck Fairness Act, which the later is pending before congress. After listening to the presentation and thinking about what I have heard so far regarding these 2 pieces of legislation, it becomes crystal clear that companies are going to have to prove why the pay people differently. How many times do managers make pay decisions and not document why those decision are made? These two acts are going to require managers and/or HR to explain why compensation decisions are made. (It was also clear that merit increases may be forever changed as well. See, Mike Haberman's comments on this subject).

Given my post last week, regarding "Pay for Performance-Really," I had to ask the question, "Are companies going to have to get serious regarding pay for performance." Robinson stated, he thinks companies will have to start doing a better job in this area.

Given that pay disparities need to explained according the Paycheck Fairness Act using a "bona fide factor other than sex" making sure that factors such as education, experience or training is JOB RELATED.

So, what I think this means for HR professionals is:

1) Compensation structures need to be updated and equitable both internally and externally. I believe compensation studies are going to be very popular as a good offense. (Phillip Blount and Associates are excellent at this)
2) Job descriptions will have to be accurate about those bona fide factors that are job related. Another good offense!
3) Managers need to explain and detail all compensation decisions.

What are your thoughts on the impacts of these pieces of legislation?


Barbara Mackintosh, CCP, SPHR said...


Great points! One other area that our firm feels will also be impacted will be performance management systems that are tied to compensation decisions. It will be crucial to ensure that management is using the same "measuring stick" in cases where companies use performance ratings to differentiate pay decisions. They must make sure that ratings are reliable and valid and consistent across different departments, divisions and the entire organization. While performance evaluation ratings will never be completely objective, companies can design performance management systems that are job-specific, conduct rater reliability training for managers and help them become more aware of common rater biases that could potentially lead to perceived (or actual) discrimination.

Unknown said...

Thanks Phil! You are so right. I think to really do pay for performance your comp has to be tightly linked in to that philosophy. I know you all have done that type of structure recently and it is very effective when you are changing a culture to a high performance one!