Similarly Situated Employee Groups (SSEGs)

Guidelines for Creating SSEGs for OFCCP-Style Compensation Analyses Using Multiple Regression

The first step for conducting a compensation analysis is to build a new employee database. Because creating SSEGs is a relatively new concept (introduced in November, 2004 with OFCCP's new "proposed" compensation guidelines), this database should contain all available incumbents at the employer, or at the specific location under inquiry. All employees subject to inclusion in an AAP should be included in the database (i.e., all full-time, part-time, and temporary personnel that are actual employees of your organization). This compensation database should include the same number of employees as was included in the affirmative action plan for this establishment.

After this initial database is created, several additional fields must be added to complete the compensation analysis. The first of these fields should be labeled "SSEG." The purpose of creating SSEGs is to group employees who are "similarly situated" and appropriate to be combined for analysis purposes. Any unique label value can be used for this purpose, and we suggest using label values that also include at least part of the job title or job group name. When assigning employees into SSEGs, four factors should be considered (see page 67251 of the proposed guidelines). The four factors include the:

1. similarity of the work they perform (using job analysis data and/or interviews with job experts),
2. levels of responsibility required in their position(s),
3. skills needed to perform their jobs, and
4. qualifications needed to perform their jobs.

Examples of Faulty SSEGs

Below is a list of common mistakes made when combining employees for compensation analysis purposes:

Using EEO category - Typically EEO categories (e.g., Officials and Managers, Professionals, Technicians, etc.) will be too broad to use as SSEGs. However, EEO categories can be helpful when creating SSEGs.

Using pay grade - Typically pay grades will define the upper and lower parameters of compensation for a specific job title irrespective of the fact that employees within each grade may have dissimilar work, levels of responsibility, skills, or qualifications. However, pay grades can be helpful when creating SSEGs.

Using AAP job groups - AAP job groups combine jobs that are similar in content, wage rate, and opportunity but sometimes will not consider similarity of work, levels of responsibility, skills, or qualifications. However, job groups can be helpful when creating SSEGs.

Combining employees irrespective of academic background - For example, within the "Faculty" job title at a teaching hospital when the title includes both medical doctors (MDs) and academic doctors (Ph.D.s) and the medical doctors are hired at a higher rate.

Not considering departmental hierarchy - Employees within the same job title may be paid dramatically different wages based upon their department and/or division. For example, a Manager in Human Resources will likely be paid less than a Manager in Engineering.

Not considering geographic location and cost of living increases - For example, performing analyses by AAP job group in a roll-up AAP (i.e., where smaller locations are combined into a single larger AAP) and not considering that some individuals within the AAP job groups may live in rural areas and paid less while others in the same job group live in urban areas and are paid more due to the higher cost of living.

Summary

The OFCCP is purposefully vague in its guidance on SSEG criteria because creating clearly-defined rules is virtually impossible. There will always be exceptions to the rules based upon the dissimilarities within organizations. As a result, it is incumbent upon each organization to create SSEGs to the best of their abilities using the general guidance, and to be able to justify any/all decisions made during the process. In other words, organization must be able to clearly and concisely state why certain individuals should, or should not, be combined for analysis purposes.

It is also important to re-iterate that OFCCP compensation audits will generally adhere to a two-step process. Step one (1) being a review of the contractor's compensation analysis process (including SSEGs) to determine if it is appropriate, and step two (2) being a review of the statistical and non-statistical results to determine if systemic disparities exist. If the contractor closely adheres to the OFCCP's guidelines then step one will typically be accepted without scrutiny.