Abstract
Analysis follow-up is a crucial step in the compensation review process. If the results of a given analysis indicate the possibility of a disparity, either by protected group status or within the context of overall equity, that disparity should be investigated. Without proper follow-up, the opportunities to learn from the analysis and correct potential problem areas are lost.
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- 1.
Wal-Mart Stores, Inc., Form 10-Q for the Quarterly Period Ended October 31, 2005.
- 2.
Steven Greenhouse, “Report Warned Wal-Mart of Risks Before Bias Suit,” New York Times, June 3, 2010.
- 3.
The report also discussed specific recommendations for gender disparities in promotion rates that were identified by the analysis.
- 4.
Greenhouse, “Report Warned Wal-Mart of Risks.”
- 5.
Ibid.
- 6.
Red circling, also known as red lining, is maintaining an employee’s pay rate above the established range maximum for that employee’s classification. An employee’s pay rate may, at the discretion of management, be red circled when his or her position is downward reclassified and the current salary is above the pay range maximum for the new classification. Occurrences of red circling are most commonly found in cases of reclassification of jobs, personnel redeployment following a reduction in force, and so on.
- 7.
Though the current discussion is framed in terms of gender equity, it is equally applicable to the examination of results for all protected class definitions.
- 8.
In each of the equations, gender was represented by a dummy variable taking on a value of 1 for women and a value of 0 for men. Estimated gender effects that are negative are directionally adverse to women (there is a penalty for being female); estimated gender effects that are positive are directionally favorable to women (there is a premium for being female).
- 9.
Because there is only one female in the similarly situated employee grouping, there is only a single observation on which the estimated gender effect is based. Because of this, there is no variation among observations of the estimated gender effect. As a result, the t-statistic and its associated probability value cannot be calculated.
- 10.
This concept is explained in the Appendix.
- 11.
The difference of $312 per year is 0.86% of the women’s average annual salary (0.0086 = $312 / $36,400).
- 12.
Whether this estimated differential is in fact practically significant will depend upon its interpretation within the organization. Risk tolerances vary by organization, and each employer will have its own unique level of acceptable risk, thresholds for practical significance, etc.
- 13.
The difference of $1,040 per year is 3.5% of the women’s average annual salary (0.035 = $1,040 / $29,640).
- 14.
Assuming that receiving personnel are paid for 2,080 hours per year, we expect a woman in this similarly situated employee grouping to earn $23,712 annually ($23,712 = $11.40 per hour * 2,080 hours per year). We would expect a man in this similarly situated employee grouping to earn $23,920 annually ($23,920 = $11.50 per hour * 2,080 hours per year). The difference of $208 annually ($208 = $23,920 – $23,712) is 0.88% of the woman’s annual salary (0.0088 = $208 / $23,712).
- 15.
Whether this estimated differential is in fact practically significant will depend on its interpretation within the organization. Risk tolerances vary by organization, and each employer will have its own unique level of acceptable risk, thresholds for practical significance, and so on.
- 16.
Assuming that forklift operators are paid for 2,080 hours a year, we expect a woman in this similarly situated employee grouping to earn $28,808 annually ($28,808 = $12.85 per hour * 2,080 hours per year). We expect a man in this similarly situated employee grouping to earn $30,888 annually ($30,888 = $13.85 per hour * 2,080 hours per year). The difference of $2,080 annually ($2,080 = $30,888 – $28,808) is 7.2% of the woman’s annual salary (0.072 = $2,080 / $28,808).
- 17.
Systemic disparate treatment is discussed in Chapter 2.
- 18.
For example, the similarly situated employee grouping may contain too few employees to allow for multiple regression analysis.
- 19.
If a factor is included in the model, it has already been accounted for in the estimation process.
- 20.
The follow-up actions discussed in this chapter are meant to be illustrative of common scenarios. They are by no means exhaustive and should not be interpreted as such.
- 21.
The example companies, departments, job titles, employees, and supervisors referenced herein are fictitious. No association with any real companies, departments, job titles, employees, or supervisors is intended or should be inferred.
- 22.
These scenarios are only a handful of an innumerable set of possible scenarios and should not be interpreted as an exhaustive listing of all possible outcomes. They are presented for illustrative purposes only.
- 23.
Personnel data should be collected on all individuals employed in this job title. For illustrative purposes, this example limits the data presented to only four employees.
- 24.
Shawn Kendrick’s comment that Janette Baker was a “poor performer” is in contradiction to her performance evaluation scores.
- 25.
In fact, a review of the performance evaluations for all of the forklift operators reveals that Janette was the only employee who received such comments on her performance evaluation.
- 26.
The appropriate way in which to deal with Shawn’s comments regarding the role of women in warehouse positions and his potential gender discrimination in pay rates against women is beyond the scope of this discussion. Legal counsel should be consulted and should be involved in any disciplinary actions or other consequences imposed.
- 27.
As previously noted, the appropriate course of action for dealing with Mr. Kendrick’s comments regarding the role of women in warehouse positions and his potential gender discrimination in pay rates against women is beyond the scope of this discussion. Legal counsel should be consulted and should be involved in any disciplinary actions or other consequences imposed on Mr. Kendrick.
- 28.
Note that the combination of lower hourly rates and smaller annual increases will cause the gender disparity to increase over time, creating a greater divergence between the hourly pay rates of men and women.
- 29.
This, of course, assumes that all cost estimators with four years of time in job are identical in all other respects.
- 30.
In order to maintain consistency in compensation within the entire similarly situated employee grouping, the “dollar value” of certification will – in most cases – take on a constant value irrespective of time in job.
- 31.
As previously mentioned, the involvement of legal counsel in planning these communications is essential. Counsel should review and sign off on any verbal or written communication to employees regarding compensation adjustments.
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© 2013 Stephanie R. Thomas
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Thomas, S.R. (2013). Analysis Follow-Up. In: Compensating Your Employees Fairly. Apress, Berkeley, CA. https://doi.org/10.1007/978-1-4302-5042-5_7
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DOI: https://doi.org/10.1007/978-1-4302-5042-5_7
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