Making pay decisions in light of the Ledbetter Fair Pay Act of 2007

In a recent communication about the Lilly Ledbetter Fair Pay Act, Purdue's Office of Institutional Equity advised all departments to document reasons for all decisions affecting employees' compensation, and to keep the documentation for an indeterminate period of time. In addition, it was indicated that all administrators and supervisors need to be able to explain their compensation decisions individually and also as they relate to groups of "similarly situated" employees.

As you may know, the Ledbetter Fair Pay Act has in essence removed any time limitations for employees to file pay discrimination claims. In addition, the Act has the potential to apply to all types of compensation decisions, such as start-up packages, merit increases, annual pay increases, and promotion and tenure.

So, we know we need to keep documentation and be prepared to explain ourselves. Of course, we want our documentation to demonstrate we've made appropriate pay decisions and not work against us. How do we go about this?

Collaborative approach

As a supervisor, you need to think about pay in terms of all the people you supervise. And your department needs to have an overall approach to managing everybody's pay.

One of the least desirable ways to manage pay decisions is on a case-by-case basis:

A supervisor wants to give a pay increase, so she goes to her boss privately and explains why she thinks her employee deserves the increase.

The boss approves the adjustment in isolation from information about overall pay in the department, and absent any systematic approach to managing pay.

And so then another supervisor gets upset because he has employees he'd like to reward. He goes to the boss and makes a case for an equity adjustment for his employee; and so it goes.

Starting with large organizational units at the University (offices reporting to the President; colleges; offices of Vice Presidents; regional campuses), leadership needs to get together and decide how they want to manage pay decisions. If representatives from all levels within the unit are involved, a standard can be set that everyone knows, understands, and can manage.

Clear criteria applied consistently

As your unit begins to collaborate and make joint decisions on managing pay, it will be important to develop a compensation philosophy to help guide specific pay decisions. A compensation philosophy defines employment situations when pay adjustments are likely to occur, and it establishes parameters for those adjustments.

Range of starting salaries for new hires

Specific amount of pay adjustment correlated to standardized performance review results

Amount of pay adjustments given for promotions, upgrades, lateral transfers, demotions, and changes in responsibilities

Internal and market equity adjustments

Retention

Development and use of standardized forms and processes to ensure consistent, documented pay decisions

Your HR department can help you develop a system, processes, and forms to manage pay decisions, and it can provide overall assistance with determining and communicating information about pay and pay adjustments.

Within the coming months, you can expect to see more information from Human Resources about performance management and how it relates to pay management.

For questions or comments, please call 49-47410.

- Deb Gardner, assistant director
Compensation