Compensation interviews have become commonplace in OFCCP compliance reviews. Are you prepared for the questions they’ll ask?

OFCCP will typically begin the compensation interview with something like the following: “We conducted an analysis of your compensation data, and found an indication of possible discrimination. Thus the reason for this discussion and interview.” While it can be perfectly OK to say, “I don’t know” or “I need to get back to you with an answer,” it’s much better to be prepared in advance. Below are some questions that OFCCP is likely to ask.

Does your company have written guidelines on compensation administration?

This fundamental question will set the baseline for the rest of the compensation review. Companies with well-documented policies tend to fare better than companies with very loose compensation practices. Of course, written policies that are not consistently implemented are high on OFCCP’s target list, too. Which leads us to…

Who determines the starting salary for a new employee for your company?

Disparities in starting pay can lead to larger disparities over the course of employment. Systems with defined ranges for starting pay and multiple levels of approval tend to fare well in OFCCP audits. Lack of oversight in the setting of starting salaries is a red flag to OFCCP.

Are there annual performance increases? What is the basis for these increases?

Difference in performance is recognized as a potentially legitimate reason for salary differences. But like everything else in an audit, you’ll need the documentation to back it up. Are performance ratings being used and documented? Do similar ratings mean similar increases in pay?

Do you conduct periodic internal audits of compensation?

Federal Affirmative Action regulations require annual analysis of pay systems to ensure there are no race- or gender-based disparities in compensation. While there is no mandated format, it helps to conduct analyses similar to those used by OFCCP. This will help you identify areas that may be of concern. If possible, these analyses should be conducted within the context of attorney-client privilege.

Does your company provide training on compensation administration to managers?

OFCCP wants to know if the people making compensation decisions have been trained in the Affirmative Action and non-discrimination aspects of compensation. Training that emphasizes the importance of equal opportunity, compliance and documentation can make or break a compensation system.

May we have a copy of that?

This may be the most common question of all. If you can’t document it, it didn’t happen. If you say you have a policy, OFCCP will ask for it in writing. Be prepared!

This list only scratches the surface of the questions OFCCP may ask during a compliance review compensation interview. Expect follow up questions in each of these categories to explain the details of how your compensation system works. OFCCP may also ask questions about specific employees, departments or job titles.

Once the interview is complete, OFCCP may send their notes in writing for your review and editing. Your answers are typically then forwarded to statistical teams within OFCCP for additional review. If the valid business reasons you describe explain most differences in compensation, the compensation portion of the audit will typically end. If unexplained compensation differences remain, OFCCP may ask for additional documentation.