by Billy Hammel
The Equal Employment Opportunity Commission (EEOC) recently announced that employers with 100 or more employees must include employee pay data in their EEO-1 reports beginning in March 2018. The EEOC says it will use the data to combat “wage gaps” based on race, ethnicity, or sex.
What must be reported?
Employers with 100 or more employees and federal contractors with 50 or more employees must submit an EEO-1 report identifying employees’ race, ethnicity, and sex for the 10 EEO-1 job categories. The EEOC collects data provided by private employers, and the Office of Federal Contract Compliance Programs (OFCCP) collects data provided by federal contractors. The new rule does not change the basic EEO-1 reporting requirements.
Instead, the new rule applies to employers with 100 or more employees and requires them to submit employee pay data and hours worked for each of the 10 EEO-1 job categories. Thus, federal contractors with 50 to 99 employees must continue to report employees’ race, ethnicity, and sex for each EEO-1 job category, but they will not have to report employee pay and hours worked information required by the new rule.
For affected employers, the rule has three new provisions. First, employers must report certain types of employee compensation information. To do that, employers must group employees into 12 distinct pay bands for each of the EEO-1 job categories using employees’ W-2 compensation information, which includes wages, overtime, bonuses, and tips. According to the EEOC, the use of pay bands will provide more meaningful compensation data to the EEOC and the OFCCP.
Second, employers must report the number of hours worked by employees in each pay band for each EEO-1 job category. If employees are exempt from overtime requirements and do not keep time records, then the employer may use 40 hours as a “proxy” (or 20 hours if an exempt employee is part-time). If exempt employees keep time records, the actual number of hours worked must be used. For nonexempt employees, the hours worked must reflect what actually appears in payroll records, including overtime hours.
Third, the new rule modifies the three-month snapshot period. Currently, employers are required to take a “snapshot” of the race, ethnicity, and sex of their workforce for each of the 10 EEO-1 job categories during a pay period in July, August, or September and report the information by September 30 of each year. Under the new timetable, the snapshot period will change to October, November, or December, and the information must be reported by March 31 of the following year. That means if you submitted your 2016 EEO-1 report in September 2016, then you are done until the last calendar quarter of 2017, and you won’t have to file another EEO-1 report until March 31, 2018.
The March 31, 2018, deadline for the 2017 EEO-1 report may seem like a long way away, but assembling the new pay and hours worked data will take time. Therefore, employers should start preparing now. Here are a few suggestions:
- Determine whether your company’s payroll software can be cross-referenced with HR records of employees’ race, ethnicity, and sex. If the two databases cannot work together, create a reporting plan with appropriate internal timetables.
- Review your company’s job descriptions to ensure that jobs are included in the correct EEO-1 job categories.
- Conduct a self-audit before the new EEO-1 “snapshot” period begins. Identify disparities that appear to be related to race, sex, or ethnicity. If an apparent disparity has a valid explanation, make sure you document it. If not, work on correcting the disparity, and determine how you will explain the correction to affected employees before the new snapshot period begins.
Ultimately, the only way to assess wage gap risks is to conduct your own self-audit before the new snapshot period starts. Although conducting a self-audit is no small task, employers must know what their data may indicate well before submitting it. An ounce of prevention is worth a pound of cure.