The extent and amount of heterogeneous phenotypic variance for milk yield in the Uruguayan Holstein population were evaluated and a simple method of accounting for heterogeneity was developed. Lactation records (159 169) collected between 1989 and 1998 by two recording schemes were used to form 8955 herd-year-season-parity-lactation length contemporary groups. A log-linear model was used to identify factors affecting heterogeneity of phenotypic variance. The model included effects of production level, contemporary group size, recording scheme, herd, season of calving, parity number, calving year period and length of lactation and accounted for 50% of the variation in log variances. Estimates from this model were used in a Bayesian manner, to obtain posterior mean estimates of within-contemporary-group variances, which were then used to standardize records to a baseline variance. Effects of the adjustment were assessed by comparing coefficients of variation before and after correction, by correlation and regression between mean and standard deviations, and by using Gini coefficients and Lorenz curves. The adjustment procedure reduced heteroscedasticity primarily by decreasing the frequency of low-variance contemporary groups. Lorenz curves and Gini coefficients indicated that the largest impact of the standardization procedure was related to the size of the contemporary group. Some differences in the effect of the correction were found between recording schemes. The method for adjusting records is simple and easy to adapt to current genetic evaluation procedures.