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California Enacts Expanded Pay Data Reporting

On September 30th California signed a law that expands employer pay data reporting.  The reporting requirement mirrors that of the EEOC’s Component 2 reporting requirements, which since has not been renewed by the EEOC.  SB 973, requires that private employers with 100 or more employees must annually report to the state detailed pay data categorized by gender, race, and ethnicity. Employers will report to the Department of Fair Employment and Housing (DFEH) by March 31, 2021 and every March 31 thereafter.

What you need to know

This state mandated reporting requirement is no surprise to those following the situation.  After the EEOC failed to renew the requirements for Component 2 reporting many believed that individual states would adopt similar legislation.  Because of this there is good news and bad news for employers.  The good news is that they should have completed this expanded reporting for the EEOC last year, so they have some familiarity with the data and the process. The bad news is that they now have to capture a large amount of data and complete a complex reporting form. The report must include the following information:

  1. The number of employees by race, ethnicity, and sex for 10 job categories. This is established by providing a “workforce snapshot” that counts all employees in each job category by race, ethnicity, and sex, employed during a single pay period of the employer’s choice between October 1 and December 31 of the Reporting Year. The 10 job categories are as follows:
  1. Executive or senior level officials and managers.
    2. First or mid-level officials and managers.
    3. Professionals.
    4. Technicians.
    5. Sales workers.
    6. Administrative support workers.
    7. Craft workers.
    8. Operatives.
    9. Laborers and helpers.
    10. Service workers.

Employers can rely on documentation and guidance provided by the EEOC and the State of California to determine an employee’s appropriate job category for reporting purposes.

  1. The number of employees by race, ethnicity, and sex, whose earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in its Occupational Employment Statistics Survey. This is established by calculating the total earnings shown on the IRS Form W-2 for each employee in the “workforce snapshot” for the entire Reporting Year, regardless of whether an employee worked the full calendar year.
  2. The total number of hours worked by each employee counted in each pay band during the Reporting Year.
  3. The employer’s North American Industry Classification System (NAICS) code.
  4. The Report may include a section for the employer to provide clarifying remarks; however, it is not required.

Conclusion

The purpose of this law, and the EEOC’s Component 2 reporting is to get a better understanding of pay disparity.  The main objection to the expanded reporting was and continues to be that it puts an undue burden on employers due to the significant amount of work it creates.  It is important to note that vendors such as SyncStream Solutions have software available that ease the burden of this type of reporting and can programmatically complete steps in this process that may otherwise take hours of manual labor.  Employers should first identify who within their organization will be responsible to complete this compliance task, and searching for a vendor to support the effort would be a wise move. 

Tags: EEO-1 reporting, EEOC, expanded eeo-1 reporting, employers, legislative activity