On September 29, 2016, the EEOC announced that starting on March 31, 2018, certain employers will be required to submit employee pay data to the agency. The data will be used by the EEOC to combat pay discrimination.
The new requirement will apply to private employers, including federal contractors and subcontractors, with 100 or more employees. These employers will be required to report aggregate W-2 income of their employees broken down by sex, race, ethnicity, and job group. Employers will not be asked to report individual salaries or any personally identifiable information of employees.
The EEOC says that collecting pay data will enable it to spot pay disparities indicative of unlawful discrimination. Critics say the use of W2 data for this purpose is an oversimplified approach, failing to take into account work experience, job responsibilities, an employee’s choice to take on overtime work, and other nondiscriminatory factors that may affect pay. Further, many employers have expressed concern over the significant burden the new reporting requirements will place on them, both in terms of cost and time spent.
Although the new requirements will not go into effect for another 18 months, employers should begin preparing for the changes without delay. A first step would be to conduct a rigorous internal review of compensation practices and W2 data to look for any appearance of discrimination that could be rectified before the March 31, 2018 deadline. Companies should also begin preparing for the administrative aspect of the new requirements, by planning who will be involved in the reporting process and what systems will be used.
The EEOC’s requirements are bound to cause major headaches for affected employers. For guidance on preparing and complying with these requirements, or to schedule a compliance audit focusing on your pay data, please contact one of the HR consultants at PMP.
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Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding pay data collection. Please keep in mind that in addition to our staff of seasoned HR professionals, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding legal compliance. Sign up for our Fall 2016 Compliance Workshop Series or contact us at 800-921-2195 or 516-921-3400. You can also visit our website http://www.pmphr.com/ or e-mail us at info@pmpHR.com.
This article is intended for general information only and should not be construed as legal advice.