Government Contractors Prepare for Federal Salary History Ban and Pay Transparency Regulations

Quick look: Government contractors and other federal agencies must update company policies to comply with the latest salary history and pay transparency regulations. Here’s a quick summary of these new requirements and how professional employer organizations (PEOs) can make meeting industry compliance smoother.

The United States government recently announced regulatory expectations that impact government contracting agencies’ hiring processes. These motions enhance the government’s pursuit of pay equity and inclusivity for federal employees. Here is a breakdown of these vital announcements and how government contractors can adapt to these compliance changes with PEO support.

Salary History Inquiry Ban

The Office of Personnel Management (OPM) created a final rule prohibiting government contractors, subcontractors, and other federal agencies from considering or requiring an applicant’s salary history for a position. Salary histories reflect what wages an individual has earned in previous roles. Though this information has been used for background checks, it also opens the door to bias. Employers could be tempted to expect new employees to accept similar pay ranges, which can perpetuate discriminatory practices such as gender pay gaps and race-based wage disparities.

Government contractors must outline a compliance policy acknowledging this rule, including preventative measures and consequences for insubordination, by October 1, 2024.

Mandatory pay transparency

Federal leaders in the U.S. government are also spotlighting pay transparency. A proposal made by the Federal Acquisition Regulatory (FAR) Council would require all federal agencies to add salary ranges within a job post’s description. This proposal also seconds the act of banning employers from inquiring about a job candidate’s salary history.

Laws favoring pay transparency have increased, with states like New York and California already having similar regulations. The growing enthusiasm behind pay transparency is influenced by the benefits it offers agencies and employees. Being open about a job’s wage allows business leaders to encourage pay equity, boost employee engagement, and build trust with workers.

On the recruitment and hiring front, 66% of employers that added pay ranges to job posts saw increased applicant quality. This practice also streamlines job offer negotiations, which reduces hiring times and converts applicants into new employees sooner.

Access to federal guidance

The final federal announcement highlights the Department of Labor (DOL) offering specialty guidance on these new regulatory expectations. Government contractors and federal agencies can access resources from the Office of Federal Contract Compliance Programs that further clarify the details behind these changes. These materials also demonstrate what new obligations agencies must follow to avoid wage discrimination risks and consequences.

How PEOs help maintain compliance

Significant compliance changes can be challenging for government contracting agencies to track and comply with independently. Additionally, the demands of business objectives like contract bidding and project management can interfere with creating and executing necessary policy strategies. Fortunately, this dilemma is solvable with a PEO.

PEOs offer industry expertise and unique human resources services that enable government contractors to meet regulatory standards. PEOs can assist in the following five ways regarding these new compliance needs.

1. Execute policy reviews, updates, and audits: PEO professionals can assess an agency’s current hiring policies. Based on their review, they can either add updates to existing policies or craft new ones that reflect the salary history ban and pay transparency rules the federal government sets. A PEO can also conduct timely audits on in-place policies to maintain compliance and relevance to appropriate regulations.
2. Standardize the hiring process: Once a written record of policies is established, government contractors can work with a PEO’s recruitment experts to implement a standardized hiring process. This strategy demonstrates what factors an agency wants to be included in its recruitment efforts. From identifying interview stages to deciding how candidates are selected, standardized procedures ensure current employees and their departments follow consistent and compliant practices.
3. Implement regulation training: Relaying important compliance details to an entire workforce is pivotal. PEOs can help government contractors develop in-depth training and awareness programs to educate hiring managers and appropriate personnel on new regulations. This training can minimize procedure miscommunications, sparing businesses from facing setbacks and costly risks.
4. Outline legal obligations: In some instances, government contractors may need additional insight into the lawful details behind compliance regulations. Since PEO experts are well-versed in federal, state, and local legislation, agencies can rely on their knowledge to better understand the legal obligations, warnings, and offenses these new hiring standards entail.
5. Stay ahead of other compliances: Government contractors are subject to a range of recruiting and hiring laws that are more stringent than those applied to non-federal businesses. While implementing best practices for the recent federal updates, PEOs analyze and manage agency compliance across all relevant industry standards. Equal Employment Opportunity (EEO) laws and affirmative action requirements are just some of the multiple compliance regulations PEO professionals make sure government contracting agencies follow.

Achieve federal compliance success with ExtensisHR

ExtensisHR makes tackling regulatory updates a less intimidating process for government contractors. As a certified PEO boasting over 25 years of experience, our specialists continue to familiarize themselves with the lawful guidelines that protect employment rights and promote equity within federal businesses. This knowledge and our human-first approach to customer service allow us to convert compliance confusion into success for agencies.

On top of upholding federal industry standards, ExtensisHR helps government contractors master other HR responsibilities, including:

• Payroll and tax management
• Enterprise-level employee benefits management, administration, and enrollment
• HR task management, progress tracking, and reporting via our Work Anywhere® platform and mobile app
• Full-cycle recruiting and talent acquisition at no additional cost
• General HR administration needs

Schedule a meeting with our dedicated PEO experts and begin improving and maintaining policy compliance within your government contracting agency today.