HR Management & Compliance

What Is the True Cost of Expanded EEO-1 Reporting?

After several months of uncertainty, we now know that employers will be required to submit Component 2 data (i.e., employee wage and hour data) to the Equal Employment Opportunity Commission (EEOC) by September 30, 2019. Not only that, but they will be required to submit 2017 and 2018 Component 2 data, which means 2 years of historical workforce information. The EEOC anticipates it will open its portal for Component 2 filings by mid-July. However, Component 1 filings were still due by May 31.

Source: BPTU / shutterstock

One of the big points of contention during this legal process, which ultimately favored the plaintiff and reinstated the expanded reporting in the case Nat’l Women’s Law Center v. OMB, was the “burden” that expanded reporting puts on employers. It is this “burden” that most employers objected to when these expanded reporting requirements were first put forth by the Obama administration back in 2016. So, it begs the question: What is the true cost of expanded EEO-1 reporting?

Adding Up the Costs

It is obviously tough to definitively say what the costs would be because no one has done it yet, but we do have a couple estimates/analyses to rely on. In 2016, the EEOC published a supporting statement related to the expanded reporting. In this statement, it estimated that the overall cost of expanded EEO-1 reporting would be an average of roughly $1,400 per employer (see Graphic 1 below). All burden calculation estimates by the EEOC included reading instructions and collecting, merging, validating, and reporting data electronically, along with onetime implementation costs.

Graphic 1:

EEOC-Estimated Burden of Expanded Reporting
Identified Burden EEOC-Estimated Hours Estimated Cost
Firm Level Filer to Include 2018 Component 2 Data 15.2 hours $516.76
Establishment Level Filer to Include 2018 Component data 1.9 hours $39.66
Additional Burden of Including 2017 Component 2 Data $416.58
Onetime Implementation Cost for Gathering Component 2 Data 8 hours $446.48*
Single Company Total $1,379.82
Multi-Establishment Company w/ 5 Establishments $1,578.12
*This is based on 8 hours for a computer programmer with an average hourly rate of $55.

 

You may be thinking that $1,400 doesn’t sound that bad, but it’s more nuanced than the EEOC may be assuming. This estimate is widely contested by over 20 major national employer groups, including the U.S. Chamber of Commerce, the Society for Human Resource Management (SHRM), and the National Federation of Independent Business, to name a few. This point was cited several times throughout the legal process.

Figures Differ Wildly

The U.S. Chamber of Commerce did its own analysis on the cost burden to employers related to expanded reporting, and the average cost it came up with was a whopping $21,000 per employer—a stark contrast to the estimate provided by the EEOC. So, what is the right number? We don’t know for sure, but we’d have to guess it is somewhere in the middle of these two estimates.

It is unrealistic to think that this is a minor task for a Human Resources (HR) employee or even an entire HR team. They will have to identify where to find these source data for 2 historical years. They will face challenges like crediting hours of service to exempt employees where actual hours of service were not tracked. If data were not kept accurately, this will require HR to act as forensic accountants trying to recreate employment scenarios from years ago. Gathering the wage and hour data is just the first challenge.

The next major challenge lies in trying to populate the form. It is important to remember that a Component 2 form was made public before the EEOC’s abrupt about-face took place in August 2017. This form exploded the old EEO-1 report from a 2-page filing to an 8-page mammoth, with over 1,000 data points to be filled in. The risk for human error exponentially increases with an expanded form of this magnitude.

Employers should begin preparing their data as soon as they can because who knows what land mines lie in 2 years’ worth of historical data. It’s better to find any issues now rather than being caught off guard with a deadline looming close ahead. Employers should look to their vendors to seek support on this new filing. This is an area where technology can be leveraged to save an employer time, money, and worry over noncompliance due to human error.

Arthur Tacchino, JD, is Chief Innovation Officer for SyncStream Solutions, a company offering EEO-1 and Affordable Care Act (ACA) compliance solutions.