EEO-1 Reporting: Audit Now Could Save You from an Audit Later

The Equal Employment Opportunity Commission  (EEOC) requires all employers with at least 100 employees, federal government contractors and some first-tier subcontractors[1] to file an EEO-1 report annually. The filing deadline is usually September 30th but this year’s deadline has been extended until March 31, 2018. Why?

For the first time, the EEO-1 report will require employers to disclose compensation data. This change is to test compliance with The Equal Pay Act of 1963.  The EEOC has been addressing comparable pay for comparable work for over 50 years , and for the most part  the EEOC has “assumed” employers are in compliance.  The implicit trust has come to an end.  The EEOC has expanded the EEO-1 report to include compensation data for employers with at least 100 employees.  Federal contractors and subcontractors with 50 -99 employees are exempt from the new compensation data reporting.

Compensation data must be reported for each EEO-1 job category in the newly developed 12 pay bands:

(1) $19,239 and under;

(2) $19,240 – $24,439;

(3) $24,440 – $30,679;

(4) $30,680 – $38,999;

(5) $39,000 – $49,919;

(6) $49,920 – $62,919;

(7) $62,920 – $80,079;

(8) $80,080 – $101,919;

(9) $101,920 – $128,959;

(10) $128,960 – $163,799;

(11) $163,800 – $207,999; and

(12) $208,000 and over.

To complete the EEO-1, employers must count the number of employees they have in each pay band for each job category based on sex and ethnicity or race.  To determine the appropriate pay band, employers will use using Box 1 on the employee’s W – 2 form.  Reporting of specific salaries of each individual employee will not be required.

This will allow the EEOC to get a snapshot of compensation by job category, sex and ethnicity or race of the employees. For example, an accounting firm may report that it has 12 employees in the “Professionals” job category in pay band 5, which is $39,000 – $49,919, who are men and black; and that it also has 25 Professionals in pay band 5 who are men and white.   Additionally, the EEOC will require hours worked to be reported.  Non-exempt employees will be reported within the requirements of Fair Labor Standards Act (FLSA), and employers will have a choice for exempt.  They may either:  (a) Report 20 hours per week for each part-time employee and 40 hours per week for each full-time employee; or (b) Report actual number of hours worked by exempt employees, full- or part-time, if they prefer to do so.

What will the EEOC do with the data? It will be used for investigative purposes.  According to the EEOC, the new data will improve investigations of possible pay discrimination, which may contribute to persistent wage gaps.

While March 31, 2018 seems like a long way off, employer should get their ducks in a row. The best place to start is an audit of your current compensation structure by job categories, employee sex and ethnicity or race.  You will want to see what the numbers tell you, because they will tell the EEOC the same thing.  Not only do you want to identify the discrepancies, But:

  • Can you justify the discrepancies?
  • Is the justification documented?
  • Is your practice consistent?
  • Is your practice prone to create discrepancies?

If you cannot defend your compensation practice you will need to dissect the structure and apply remedies. This can be done through a compensation study that could include internal benchmarking, an examination of salary grades and bands, and possibly an FLSA study on exemptions.

A compensation audit can be time consuming, overwhelming, and costly. But, a self-initiated audit will be less so than an EEOC audit.  So, before you complete the 2017 EEO-1 Report  take advantage of the gracious extension provided by the EEOC and make your numbers  right.

Need assistance? Email J.W. Terrill’s HR Consulting department at hrconsulting@jwterrill.com.

 

[1] First-tier subcontractors with 50 or more employees and at least $50,000 in contracts have an EEO-1 reporting obligation.

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