EEO-1 Component 2: Prepare for Pay Data Reporting

August 29, 2023 Robert Sheen

EEO-1 Component 2

Speculation over the return of EEO-1 Component 2 pay data reporting has been rife for some time.  To be precise, since Equal Employment Opportunity Commission (EEOC) Commissioner Keith Sonderling warned, “Watch out, it is coming”.

This time, speculation cannot be dismissed, as Bloomberg Law reports the EEOC is “widely expected” to reinstate EEO-1 Component 2. 

Background to EEO-1 Component 2

Since 1966, the EEOC has been collecting Component 1 data as part of its mandate to prevent employment discrimination, under Title VII of the Civil Rights Act of 1964. It focuses on demographic data relating to employee job categories, race/ethnicity, and gender. 

Organizations required to comply with Component 1 include:

  • Private employers with 100 or more employees.
  • Certain government contractors (those to whom Executive Order 11246 applies and with 50 or more employees).

Between 2016 and 2018, EEO-1 Component 2 required employers to submit snapshots of employee pay data. Its purpose was to enable the EEOC and Office of Federal Contract Compliance Programs (OFCCP) to identify and prevent potential pay disparities across different demographic groups. 

EEO-1 Component 2 was reversed under the Trump administration. 

But as workplace equality remains elusive, and pay equity becomes a priority, change is inevitable. 

EEOC Equity Action Plan

In 2022, pay equity was renewed as a priority in the EEOC Equity Action Plan. The plan outlines goals that tackle systemic discrimination, advance equity, and better serve members of vulnerable and underserved communities. A key goal is the improvement of data collection and reporting, including pay data reporting analysis. 

Addressing pay data reporting at the NILG Conference

Pay data reporting featured prominently at 2023’s National Industry Liaison Group (NILG) Annual Conference. During extensive discussions, EEOC Chair Jocelyn Samuels confirmed the EEOC is now considering the National Academy of Sciences’ study Evaluation of Compensation Data Collected Through The EEO-1 Form.   

One high-level perspective concludes that pay data collecting/reporting is a key tool to fight discrimination. 

While reluctant to reveal too much ahead of the Commission’s process, Chair Samuels confirmed the EEOC will seek stakeholder input as part of its process. Significantly, she believes pay data reporting is “something they are moving towards.” 

Chair Samuels was not the only EEOC member to address EEO1-Component 2 at NILG’s conference. Commissioner Charlotte Burrows stated the report confirmed that pay data reporting can be a useful tool to identify pay disparities. 

Challenges to EEO-1 Component 2

As Bloomberg Law notes, the potential revival of pay data reporting under Component 2 is meeting resistance. Opponents argue that it is not useful and too difficult to collect, two factors that may expose the EEOC to litigation. The report itself concedes that the process of gathering data, as well as the data to be collected, contain flaws.

Resistance to workplace equality and pay data reporting is not uncommon. An equal pay mandate for temporary workers in New Jersey recently met with strong resistance in the shape of an unsuccessful lawsuit. 

How might pay data reporting change under EEO-1 Component 2?

At Trusaic, we believe the EU Pay Transparency Directive could form a blueprint for future US pay equity legislation. Parallels in pay data reporting exist in areas including salary history bans, expanding pay transparency legislation, and a focus on intersectionality.  

But right now, we are falling behind on workplace equality, as efforts to close the gender pay gap have stalled. OECD’s rankings for women in the workforce also place the US in a lowly 25th place out of 33 countries. 

How can we collectively improve that? 

Two key goals of EEO-1 Component 2 are: 

  • To assist the EEOC and OFCCP to identify potential pay disparities and discrimination, and;
  • To encourage companies to proactively close the gender pay gap.

In an earlier article, we highlight how a revised EEO-1 Component 2 might look, taking inspiration from the Pay Transparency Directive. Our suggestions include: 

  • Expand employee definition and job categories: Adopting the EU’s broader term of “worker” versus “employee” creates a more inclusive range of employees.  
  • Embrace intersectional reporting: Expanding naturally on EEO-1 Component 1, intersectionality examines multiple factors or demographics affecting pay, not just isolated individual factors. In a groundbreaking move, EU pay data reporting now includes provision for non-binary workers. 
  • Expand the “workforce snapshot period” and pay data reporting criteria: Both can provide more detailed insight into potential pay disparities. As an example of how to expand criteria, the Pay Transparency Directive requires pay data reporting on six principal areas.
  • Consider a gender pay gap threshold: EU employers must now act when the gender pay gap exceeds 5%. While that may seem a step too far right now, setting incremental goals to close the pay gap in your organization can begin to achieve pay equity. 

Creating workplace equality for all

Workplace equality cannot continue to be a vague goal that we might hope to reach. 

Pay disparities are symptomatic of a much deeper malaise affecting the working environment. New research found that women are 41% more likely to experience a toxic culture at work than men. Research from the National Women’s Law Center (NWLC) sheds further light on the barriers faced by women in employment, health, and overall well-being. 

Pay data reporting as a means of analyzing pay equity is not merely a legal obligation. It is the right thing to do to create inclusive cultures. On Equal Pay Day, President Biden stated:

“… we need to not only crack down on discrimination but also address the systemic issues behind the pay gap.” 

Employers don’t need to wait for the reinstatement of EEO1-Component 2 to meet the goals of the EEOC Equity Action Plan. Preparation for pay data reporting begins now with a pay equity audit. 

Our state-of-the-art pay equity software, PayParity, helps to solve HR’s most complex challenges around people, data, and compliance. Find out how. Talk to one of our pay equity experts.

Download: Pay Equity Definitive Guide

To learn more about achieving pay equity, click here.

The post EEO-1 Component 2: Prepare for Pay Data Reporting first appeared on Trusaic.

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