Submitting Employee Pay Data in an OFCCP Compliance Review

With the release of a new Scheduling List by OFCCP, many federal contractors are beginning to prepare for audits. One of the most important items submitted in an audit is a response to Item 19 of the OFCCP’s Scheduling Letter and Itemized Listing.

Item 19 requests “Employee level compensation data for all employees (including but not limited to full-time, part-time, contract, per diem or day labor, and temporary employees) as of the date of the organizational display or workforce analysis.” In addition, contractors must provide the Race, Gender, hire data, job title, EEO-1 category, and job group for each employee on the Item 19. Other compensation or adjustments to salary such as bonuses, incentives, commissions, merit increases, locality pay, or overtime should be identified separately for each employee. Contractors are also permitted, but not required, to provide information on the factors that are used to set employee pay, such as education, location, department or function, and salary level/band/range/grade. Contractors may also share any written compensation policies with the OFCCP.

Here are some tips for preparing this part of your OFCCP submission:

• Involve relevant internal stakeholders in preparing this part of your submission, including your compensation team
• Remember that the base pay figure should be annualized as of the date of your workforce snapshot. For example, if you prepare January 1 AAPs, the base pay would be the annualized pay for each employee as of January 1 of the relevant year.
• Keep in mind, however, that the “other compensation” you provide is compensation earned or paid in the 12 months prior to the workforce snapshot. Sometimes, this can be confusing, especially for employees who changes roles during the year. For example, an employee who is now an exempt employee as of the workforce snapshot date may have been paid overtime in the prior 12 months because they were in a non-exempt role at the time. The overtime pay would be reported on the Item 19, even though it was not earned by the employee in the role listed on the Item 19.
• Consider providing a legend explaining each column of your Item 19 submission. This helps OFCCP understand what each column in your Item 19 represents.

You may be wondering how OFCCP evaluates the pay data you submit in an audit. The agency has stated that it will conduct an analysis of the submitted pay data to identify possible pay equity concerns. The Agency has also said it will review a contractor’s Item 19 broadly “to identify patterns of segregation by race, ethnicity, and gender, which may result from assignment, placement, or upgrading/promotion barriers that drive pay disparities.” Contractors should examine the employee pay data they are doing to submit to OFCCP from the same lens as part of their preparation.

Typically, the OFCCP initially reviews average differences in pay by gender and race. The Agency then seeks to examine a contractor’s Item 19 submission using a statistical technique called “multiple linear regression” which looks at the relationship between independent pay variables in predicting employee pay. For more information about the types of analyses OFCCP might conduct, all contractors on the audit list should be familiar with DIR 2018-05, Analysis of Contractor Compensation Practices During a Compliance Evaluation. 

Preparing for the compensation part of any compliance review is one of the most important steps you can take while you wait for your Scheduling Letter as pay equity continues to be a top enforcement priority for the OFCCP and other government agencies. Berkshire can help contractors prepare analyses of the compensation data to be submitted to OFCCP. Doing so before you submit any information to OFCCP helps your organization understand how the OFCCP will look at your employee pay data and allows you to anticipate the types of questions the Agency may ask about your compensation practices. This is an area of audit preparation where proactive review is worth its weight in gold.