Pub. 10 2020-2021 Issue 6

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2021 21 • Establishing guidelines for flexible compensation offers, such as start - ing salary, raises, and promotions when planning incoming prospective employees’ recruitment. This also includes pay negotiations that either an incoming prospective employee, current employee or even the organiza- tion may initiate. • Keeping detailed records of the rea- sons for each compensation decision made for each employee. Consistency in applying these methods for all employees and not deviating without good reason is an absolute necessity. If not, these methods can no longer be considered defensible or justifiable. Additionally, em - ployers can limit liability for potential risk. In particular, by promoting transparency, employers proactively diligently evaluate their compensation practices (i.e., incon- sistent or outdated pay policies), which could later be used in audits if cited as a pay equity claim. The goal then should be to conduct regular pay audits to mitigate the risks. Planning for this endeavor is critical. The initial action of a successful pay audit is to identify the goals and objectives of the audit. It could be that your company is attempting to mitigate legal risk and take advantage of regulatory safe harbors. In other instances, an audit’s purpose is in response to shareholder demands for proof that a pay gap does not exist. It might be that your company desires assurances that employees are equitably compensated. The audit’s purpose ultimately dictates the pro- cess and methodology. The process and methodology approach should be robust and all-inclusive, follow- ing these general steps: 1) E stablish the team. This should typically include HR, internal legal, outside counsel and compensation consultants. 2) C onclude which employees are performing similar or compara- ble work. This should not be con- fused with equal work, as comparable is a more broad definition. This stage is where the importance of proper job titling and job descriptions is realized. 3) A nalyzing data based on the job groups identified in step 2. The focus of most companies over the past few years has been on gender inequality. While this is certainly an area of focus, ensur- ing all protected employee classes are similarly assessed is import- ant. This is a simplified analysis, reviewing one person’s salaries versus the next based on gender, race and age alone. 4) T he next step is applying unique individual factors that impact compensation levels, e.g., experience, tenure, edu- cation and performance. This process is more complicated and requires specialized scoring meth- odologies to rank employees within each job group. 5) Identifying and assessing pay discrepancies relative to fed- eral and state laws to ensure they are justifiable. Although other reasons exist, most cases justify pay differential if it can be demonstrated that the variance is attributed to i) a seniority-based system, ii) a merit-based system or iii) a method that quantifies earnings or quantity or quality of production. These allowances also apply to Colorado’s new Equal Pay for Equal Work Act, which went into effect in January of this year. By now, Colorado employers should be familiar with the provisions under the act and be aware of the unique requirements not found in any other state law. Specifically — companies must make efforts to make known all opportunities for promotion to all their cur- rent employees on the same cal- endar day. They must disclose the salary or hourly pay rate or range of every job opening and describe all other benefits of - fered. The law intends to enforce equitable pay practices and transparency, new notice and record-keeping requirements, and encourage employers to periodically self-audit their compensation practices. 6) T he last step is documentation and taking corrective action where necessary. Discrepan- cies will probably be identified. These will likely be minimal and the impact marginal, but adjust- ments will likely need to occur. There is a need to establish and maintain pay equity across all indus- tries, but specifically, in the Banking sector, research shows the gender pay gap is wider. There is much work to be done; however, the industry is starting to take action to close the gap with key approaches centered around recruit- ment, retention and career advance- ment. Additionally, as diversity issues continue to take center stage, compa- nies should consider implementing gender diversity policies to attract, retain and advance female talent. Although not the systemic problem portrayed by radical media and pol- iticians looking to sway the vote, pay equity is an issue that needs constant monitoring. Given the regulatory and business ethics issues surrounding pay equity, compensation profes- sionals would be remiss to ignore the issue and hope for the best. n By promoting transparency, employers proactively diligently evaluate their compensation practices (i.e., inconsistent or outdated pay policies), which could later be used in audits if cited as a pay equity claim.