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Clarify reasons for differences in employees’ pay

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When it comes to compensation systems, KISS is the rule. If you keep your pay system simple, you're less likely to have to explain yourself in court, as the following case shows.

If your organization offers employees choices of compensation plans, or your pay system results in wide compensation swings among employees who do the same job, consider simplifying the system. At the very least, make sure everyone understands how the system works.

Recent case: All mechanics at Houser Buick had a choice on how to be paid for their car-repair work: either earn a set hourly wage or a flat fee for each job. A supervisor set the per-job fee, based on how long the work should take.

Over a three-year period, mechanic Jose Quinones, a Hispanic male, earned $86,000, while a white mechanic managed to earn more than $210,000. Quinones took that as an indication that the company somehow discriminated against him based on his national origin. He sued, but the court sided with the company, saying Quinones couldn't show how the system disfavored him. He appealed and lost again. Still, the company was forced to spend time and money defending its wage system. (Quinones v. Houser Buick, No. 05-2246, 1st Cir., 2006)

Bottom line: If employees are confused about the pay system, as Quinones was, they're more likely to believe they're being discriminated against. Giving employees a choice of pay systems may not always be the best choice.

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