Monday, May 2, 2016

EEOC Proposes Pay Data Collection

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PNN: EEOC Pay Data

In April, the American Payroll Association (APA) submitted comments to the Equal Employment Opportunity Commission (EEOC) on its proposed revisions to the Employer Information Report, referred to as the EEO-1. The EEO-1 includes seven race and ethnicity groups in 10 job categories.

The EEOC is responsible for enforcing federal laws on workplace discrimination such as ethnicity and gender. Most of the agency’s activities fall on human resource departments. However, recent action will likely involve payroll operations.

The EEOC intends to require employers of 100 or more employees to complete the EEO-1 using pay data from Forms W-2. The APA commended the EEOC for initial efforts to reduce the burden on employers; yet, still collect the data required to address discrimination. APA members prefer an approach with no burden on payroll departments. However, the APA recognizes that some information is housed with employers.

For the EEO-1 to have meaning, the agency needs to understand how payroll processes operate and the potential limitations on W-2 data. The APA disagreed with the EEOC’s belief that the process to collect pay data will not be complicated. Forcing companies to use limited resources on yet another government data report is difficult for employers to accept. Also, the agency didn’t consider data security concerns.

The EEOC believes that to collect the data, a simple, one-time change to human resource information systems is needed, but human resource and payroll functions don’t interface in the manner that the EEOC implies. This is especially true for large, decentralized companies. Changes to software systems may take significant time and resources.

Further, the agency’s pilot study on its proposed method of data collection didn’t use actual data. This is important because a similar study using real data failed to find a means for identifying pay discrimination. That study was conducted for the Office of Federal Contract Compliance. In addition, the EEOC studied W-2 data from federal contractors. Procedures for federal government contracting are different than the private sector. Therefore, this study may not accurately reflect the burden on employers.

Critically important, W-2 data does not show an employee’s full earnings. An organization’s compensation package can skew the true value of employees’ pay. In addition, variables exist in the workplace that W-2 data doesn’t fully capture. Some benefits are not entered as total W-2 wages. These include healthcare coverage, 401(k) or other retirement plan contributions, profit-sharing contributions, and stock options.

The APA believes the EEOC should conduct an accurate and comprehensive study on what data will indicate pay discrimination. In the meantime, if the EEOC does go through with its data collection, employers will need sufficient time to comply.

If you would like to share your ideas with the APA, drop us a note in the comments section. Check back with Pay News Now for more updates on this topic.