Tipping Point Test

The Office of Contract Compliance Programs (OFCCP) has designed a new method of analyzing compensation to determine if there are significant salary disparities that warrant further investigation. This method, known as the Tipping Point, is a simplistic approach used during audits that does not comply with the OFCCP's published guidelines for analyzing compensation and does not establish unlawful pay practices. Nevertheless, OFCCP has utilized the Tipping Point as a preliminary test because it does not have the staffing resources necessary to conduct a valid compensation test, such as the Multiple Regression Analysis, during every Compliance Review.

The Tipping Point measures the percent of difference in average pay between men and women and whites and minorities without considering explanatory factors, such as seniority, experience, and performance. The report summarizes the number of females and minorities who earn at least 5% less than males and non-minorities in the same jobs. The average pay differential is considered significant if at least 10% of the female or minority workforce meets the 5% threshold, the percent of females or minorities that are paid less is at least three times the percent of males or non-minorities that are paid less and the total impacted females or minorities is at least 30. The OFCCP will also run this analysis on Job Groups when no significant disparity is reported using job titles. The results of the Tipping Point are used by the OFCCP to determine whether it will conduct a Multiple Regression Analysis and possibly proceed to an on-site investigation. Contractors under audit, therefore, may wish to verify salaries, job titles and job group assignments when a significant pay difference is reported.

Tipping Point Example & Explanation

file:tippingpoint.png

The report was run by job group in the example above. The average pay differential is considered significant when three conditions are met:

Condition 1: At least 30 females or minorities are impacted. In this case, males in the Executive and Level 1 Professionals groups earned it least 5% less than females in those groups, impacting a total of 6 males. Females earned at least 5% less than males in the other groups listed on the report, impacting a total of 48 females. This first condition is met for females because 30 or more females are impacted.

Condition 2: At least 10% of the female or minority workforce meets the 5% threshold. In this case, 11% of the male workforce and 89% of the female workforce are impacted. This second condition is met for females because at least 10% of the female workforce is impacted.

Condition 3: The percent of females or minorities impacted is at least three times the percent of males or non-minorities that are impacted. In this case, the percent of females impacted is 8 times the percent of males impacted, satisfying this third condition.

The average pay difference for females is reported as Significant because all three conditions have been met. The average pay difference for minorities is not statistically significant because only 4 minorities are impacted and there were more whites impacted than minorities, which fails to meet the first and third conditions.

Note: job groups where the average pay differential for race and gender is less than 5% are not listed on the report.