To commemorate Equal Pay Day earlier this month, President Biden issued an executive order aimed at promoting pay equity and transparency in the federal workforce.
The order applies to federal contractors and would oversee the hiring and pay-setting processes for federal workers. A proposed rule is expected in the near term from the Office of Personnel Management that will prevent the use of salary history during the hiring process.
Relying on salary history perpetuates gender and race/ethnicity wage discrimination. To combat this, many jurisdictions have passed salary history bans. Salary history bans help prevent wage discrimination because they prohibit employers from inquiring into prospective employees’ previous earnings.
The White House said in its Equal Pay Day announcement “Banning the use of prior salary history can help break the cycle of past arbitrary and potentially discriminatory pay that can follow women and workers of color from job to job, entrenching gender and racial pay gaps over time.”
The new requirements for federal contractors and subcontractors regarding salary history bans align with requirements outlined in various states across the country. A total of 21 states have issued salary history bans, including California, Colorado, Connecticut, Illinois, Nevada, and New Jersey.
Biden’s order reinforces the national strategy to achieve gender and racial equity, issued in October of last year. The order and the forthcoming proposed rule will help close gender and race/ethnicity pay gaps in the workplace, strengthen laws preventing illegal wage discrimination and promote pay transparency.
Directive 2022-01, the first new OFCCP directive under the Biden administration, confirms the agency’s renewed focus on pay equity and ending pay discrimination in the workplace. Contractors will need to conduct “in-depth analysis of their compensation systems to determine whether there are gender-, race-, or ethnicity-based disparities.”
The directive further clarifies that the OFCCP will analyze a “contractor’s workforce (across job titles, levels, roles, positions, and functions) to identify patterns of segregation by race, ethnicity, and gender” and that it will leverage “regression and other systemic analysis to look for disparities.”
Failing to comply with the new directive would be considered non-compliance in the eyes of the OFCCP and could result in legal challenges.
And so, on Equal Pay Day 2022, federal forces united to make significant progress in ending gender and race/ethnicity pay discrimination. These initiatives signal that the aggressive pay equity enforcement we anticipated is finally ramping up and that means employers need to take action as soon as possible.
To prepare for these developments, employers should conduct a pay equity audit using our PayParity software. This process will analyze your workforce’s total compensation at the intersections of gender and race/ethnicity to identify pay gaps and any illegal pay disparities. Following the completion of the audit, you can view the results in our software platform and continuously monitor your progress towards closing the gaps and achieving pay equity.
If you’re new to pay equity, download our white paper, What is Pay Equity?
Conducting a pay equity audit is a key component to ensuring equitable compensation within your organization. Just as important as the analysis is how you communicate findings and progress with various stakeholders. Download The Pay Equity Communications Planner to learn best practices for discussing compensation, both internally and externally.