New Compensation Reporting Requirements Begin March 2018

It’s Official! The EEOC is moving forward with collecting new pay and hours data and is sending a strong message that it will increase enforcement efforts. Beginning in 2018, employers with 100 or more employees are required to report employee pay and hours data annually to the EEOC. Each annual filing period is March 31st of the following year. Although the first reporting deadline for the new EEO-1 isn’t until 2018, the report will be based on 2017 data – just four months away.  HR.BLR.com, Kate McGovern Tornone, outlines strong recommendations for employers.

 

 

Beginning in March 2018, employers will have to include compensation information on their EEO-1 filings. While the report was previously used by the U.S. Equal Employment Opportunity Commission (EEOC) to look for various types of discrimination, it now also will be used to look for pay discrimination.

The EEOC’s chair, Jenny R. Yang, said that the data collection will help employers evaluate their pay practices while strengthening the commission’s enforcement of federal nondiscrimination laws.

Private practitioners, however, warn that the administrative burden on employers will be significant, with little benefit for workers.  “The ‘gender pay gap’ exists, but it is far from established that the gap is a result of discrimination,” according to a client alert from Donald S. Prophete and Robin E. Shea, attorneys at Constangy, Brooks, Smith & Prophete, LLP. “The ‘pay gap’ compares the average pay of all women in the workforce with the average pay of all men in the workforce. It does not control for type of position held, geography, career ambition, family responsibilities, education, type of employer, length of employment, gaps in employment, era in which one entered the workforce, or anything else that might legitimately affect pay.”

Because the data that will be provided does not control for these factors, it could result in frivolous charges or “inquiries” of employers about pay gaps that are legitimate, Prophete and Shea warned.

However, employers should do what they can to ensure that employees are paid equitably, the attorneys said, recommending that employers conduct a thorough compensation audit before the new EEO-1 “snapshot” window. (See Q&As below for more information on the window.)

At a minimum, Constangy recommends that employers:

  • Identify any disparities that appear to be correlated with race, sex, or ethnicity;
  • Ensure you have the documentation necessary to explain and validate disparities; and
  • Correct any disparities that do not have valid explanations.

EEOC issued a question-and-answer document to assist employers with compliance. The following Q&As have been adapted from that document.

Q: Who must file the EEO-1?

A: Beginning with the 2017 report, due March 31, 2018, the following is required:

  • Private employers including federal contractors and subcontractors with 100 or more employees will submit summary pay data.
  • Federal contractors and subcontractors with 50 to 99 employees will not submit summary pay data but will continue to report demographic data (sex and race or ethnicity) as they did before.
  • Federal contractors and subcontractors with 49 or fewer employees, and companies without federal contracts with 99 or fewer employees, will not be required to complete the EEO-1 report.

Q: When should we count our employees?

A: For reporting years 2016 and before, the “workforce snapshot period” was July 1 to September 30. Starting with the EEO-1 report of 2017 data, however, the period will be October 1 to December 31, 2017. Each employer may choose any pay period during this 3-month period to count its full and part-time employees.

Q: What compensation information will be required?

A: The revised EEO-1 report has two new elements:

  • Summary pay data: Employers report the total number of full and part-time employees they had during that year in each of 12 pay bands listed for each EEO-1 job category; employers do not report individual pay or salaries.
  • Aggregate hours worked data: Employers tally and report the number of hours worked that year by all the employees accounted for in each pay band.

Q: What are the “pay bands”?

A: EEO-1 will be the same as the 12 pay bands used by the Bureau of Labor Statistics for the Occupation Employment Statistics survey. The first is “$19,239 and under” and the 12th is “$208,000 and over.”

Q:  How is compensation determined for these bands?

A: Employers will rely on the pay reported for income tax purposes that year in Box 1 of the W-2 form. For purposes of the survey, wages earned after the conclusion of the last full pay period in December but paid to employees in the next calendar year will be reported for the same year in which they are reported for W-2 purposes.

Q: How must employees’ hours be tracked?

A: For nonexempt employees, for whom the FLSA already requires employers to keep records of hours worked, employers will consult these records to identify the number of hours worked. For employees who are exempt from the Fair Labor Standards Act, employers may either report 20 hours per week for each part-time employee and 40 hours per week for each full-time employee or report employees’ actual hours worked.

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