Ask the Experts: The OFCCP's "Tipping Point" Test
Question: In a compliance evaluation, how does the OFCCP decide whether to ask for more compensation data?
Answer: When reviewing a contractor's compensation data, the OFCCP often uses what is known as the "tipping point" test or the "5-30-3" test.
The OFCCP begins by comparing average compensation for gender and racial groups within a pay division, which might be job group, job category, grade, or band. In the first step of this test, the OFCCP identifies pay divisions where the gender or racial groups have compensation differences of at least 5%. As an example, let's say that in grades AB and CD, women have average compensation that is more than 5% below the average compensation of the men in those grades.
In the second step of the test, the OFCCP counts the employees within the negatively impacted gender or racial group for the identified pay divisions to determine whether they represent at least 30% of the total number of that gender or racial group within the entire workforce. Using our example, let's say that grade AB includes 30 women and grade CD includes 20 women. There are 100 total women in the workforce, so 50% of the women are negatively impacted.
In the third step of the test, the OFCCP determines whether the percentage of the workforce in the negatively impacted group is at least three times that of the percentage of the comparison group. This is indicative of whether the differences are focused on a particular gender or race group. In our example, 50% of the women were negatively impacted. In grade EF, however, 10 men were negatively impacted. There are 100 total men in the workforce, so 10% of the men were negatively impacted. The percentage of negatively impacted women is therefore five times that of the percentage of negatively impacted men.
When a contractor's compensation data does not pass the 5-30-3 rule, the OFCCP requests additional data that allows the agency to conduct a regression analysis to determine which factors are influencing compensation. The requested data often includes:
- Employee identifier
- Gender and/or race
- Time with company/date of hire
- Time in current position/date of last change in grade/title
- Date of birth
- Current base compensation
- FT/PT status
- Title
- Exempt/non-exempt status
- Pay division
- Employee location
To work toward eliminating any pay disparity within job group, job category, grade, or band, HR Works, Inc. recommends this analysis be performed at least annually.
