Pay equity legislation and requirements in the US state of California
Within the US, the state of California has adopted relatively progressive legislation in support of pay equity. The pay data reporting requirement was introduced in 2021 and has since received updates that take effect early in 2023. The most recent legislation extends the pay data reporting requirements and adds more requirements for transparency. (See this article for more details and background.)
Overall, the laws outline a twofold responsibility for employers: annual pay data reporting and pay scale transparency requirements.
First, per the state’s pay data reporting requirements, employers must report their data to the state’s Civil Rights Department (CRD) by the second Wednesday of May every year. Reports are based on snapshot periods, which are chosen by the employer. The snapshot period can be any single pay period in the year’s final quarter.
There are two types of employee reports. The first is the payroll employee report, which is required for all employers with 100 or more employees. Organizations with multiple establishments should submit a single consolidated payroll employee report covering all establishments. The report follows a template, which groups workers based on job category (based on EEOC definitions), gender, race/ethnicity, pay band (defined according to the Bureau of Labor Statistics Occupational Employment and Wage Statistics survey), and establishment (for employers with multiple establishments).
For each group of payroll employees, employers should report the following:
- Mean hourly rate
- Median hourly rate
- Total hours worked
For each row in this report, employers can feel free to add clarifying remarks.
The second report type is required for all employers with 100 or more workers hired through labor contractors. This report is known as the labor contractor employee report or the labor contractor report. It uses a template very similar to the payroll employee report, reporting the same key metrics and extending the template by adding information about the contracting company. It is also based on a snapshot period, but it does not need to be based on the same period as the payroll employee report.
There are substantial penalties for failing to meet the reporting requirements. A first violation can incur fines of up to $100 per employee, and a subsequent violation can cost up to $200 per employee.
The second part of California’s legislation addresses pay scale transparency. The state’s requirements aim to make pay information accessible to both current employees and job applicants. If asked by an employee or applicant, all employers must disclose the pay range (in the form of specific pay bands) of any job. They are also required to keep pay-related records for each employee for at least three years after the employee’s departure.
Employers with 15 or more employees are also subject to rules related to job listings: they must include the pay range for each posted job.
PayAnalytics support for California’s pay data reporting requirements
The PayAnalytics platform provides comprehensive functionality that helps California employers meet their annual reporting needs. As previously mentioned, California’s payroll employee report and labor contractor report are both template-based, and PayAnalytics’ pay data reports follow the state’s template. They are ready to export to Excel with just a few clicks and can be uploaded directly to the state’s online portal.
The following data for each employee is needed for PayAnalytics to generate California reports:
- Hourly rate
- Total hours worked
- Job category
- Compensation amount from IRS W-2 form (this determines the employee’s pay band)
- Establishment (for organizations with multiple establishments)
- Contractor (for the labour contractor report)
Note that if you need some help defining job categories, PayAnalytics helps you map employees’ jobs to the 10 EEOC job categories before you create the report.
PayAnalytics support for California’s pay scale transparency requirements
To achieve and maintain compliance with California’s pay transparency requirements, organizations use our pay bands feature. This feature makes it simple to:
- Identify pay bands based on employee groups
- Visualize where employees fall within their pay bands and detecting if any fall outside their intended bands
- Calculate raises to correct the compensation of employees who fall below their pay bands
- Ensure that pay for new hires or promoted employees is in line with their pay bands
With this functionality, the pay bands feature helps organizations maintain the compensation structure they want. Employers can then feel confident in their transparency – whether posting the pay band in a job listing or talking to a current employee about their salary.
Further support in PayAnalytics
Beyond just the state level, PayAnalytics supports employers in meeting a couple of key federal reporting requirements in the US:
- EEO-1 demographic data – generates an EEO-1 report in just a few clicks
- Helps with some requirements of OFCCP reporting for federal contractors
PayAnalytics can also help with much more than just reporting. It’s a holistic solution for many challenges involving compensation structures and broader workplace equity:
- Measures gender or other demographic pay gaps and suggests targeted raises to close them
- Provides ongoing decision support that ensures pay equity with every raise, promotion, and new hire
- Offers insights into equity questions such as diversity in hiring and promotion
Do you have questions about how PayAnalytics can support your organization in meeting California’s reporting requirements? Please contact us anytime, and feel free to request a demo of our software.
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