COMP NEWS – The Equal Employment Opportunity Commission has indicated to employers that the return of EEO-1 Component 2 pay data reporting is imminent.

EEOC Commissioner Keith Sonderling recently announced that EEO-1 Component 2 pay data reporting will return. Even though conducting a pay equity audit currently isn’t specifically required, Trusaic’s Joanna Kim-Brunetti suggests employers should do an audit to detect disparities prior to completing the annual report.

Pay data reporting has been ongoing for nearly 60 years. But economists and pay equity experts indicate that more detailed reporting is needed to address areas of pay inequity.

The Equal Pay Act of 1963 requires that men and women be given equal pay for equal work. Yet, in the 50-plus years since its enactment, the US has yet to achieve pay equity between men and women. At the current rate, the World Economic Forum predicts it will take 132 years to reach “full parity.”

It begs the question, how can we close the gap sooner? The answer comes down to the need for employers to disclose identified pay gaps, as research from the Harvard Business Review indicates. EEO-1 Component 2 pay data reporting would do just that.

What does this mean for employers? EEO-1 Component 2 in its current form doesn’t force employees to perform pay equity audits, but it could incentivize organizations to self-report

Even though EEO-1 Component 2 in its current form doesn’t explicitly require conducting a pay equity audit, it would be in an employers’ best interest to conduct this type of assessment prior to completing the annual Component 2 pay data report.

The EEO-1 Component 2 reporting simply identifies the raw gaps. It doesn’t account for legitimate business factors that may justify some or all of the raw pay gaps, such as tenure, seniority, and merit.

Pay equity audits identify not only the raw pay gaps but the resulting pay discrepancies after accounting for legitimate business factors. This comprehensive approach provides employers with an accurate, reliable depiction of their organization’s pay practices so they have the opportunity to better understand what they’re filing with the EEOC, and any other government agency, before filling it.

Employers that choose not to conduct one before filing their reports annually can increase their exposure to pay discrimination litigation as well as agency pay equity enforcement. These actions are increasing and will continue to become more frequent if pay data reporting becomes a federal requirement again.

To read more about pay equity data and EEO-1 Component 2, click here.

For more Comp News, see our recent posts.