6 Best Practices to Prepare for California’s Pay Data Reporting Law

…And a free tool that makes it easy to report on time and error-free

We’ve hit the pay transparency tipping point. 

What was once a “nice to have” is now expected. Fueled in large part by  the dramatic surge in new pay transparency legislation, roughly one in four U.S. workers now live in a place where employers are required by law to share salary information. 

The bulk of the new laws focus on pay transparency, but California has passed attention-getting legislation that goes a step further by requiring pay data reporting. Today, 149,000 employers have complied with this law in California, and other states are looking to follow suit. Executive Director of Equal Rights Advocates, Noreen Farrell and Senior Vice President of People Success at Incorta, Sheri Kelleher discuss California’s new requirements and how organizations can stay in compliance. 

Feeling rattled by the reporting requirements? Sign up for OpenComp’s free new tool that makes it easy for organizations to report their pay data: 

OpenCompliance - CA Pay Data Edition

What does the California law require?

As Noreen Farrell explained during our recent OPEN Summit, private employers with 100 or more employees who have even one employee or a contractor hired by a third party in California must report the median and mean hourly salary of all employees and contractors by sex, race, and ethnicity to the state’s Civil Rights Commission. You can read further details about the legislation’s specifics in “What Businesses Need to Know About California’s New Pay Transparency Legislation,”or visit California’s Civil Rights Department website. 

With a fast-approaching deadline of May 10, today, employers’ most pressing worry is remaining in compliance with the new legislation, or facing the consequences.

That’s why we’ve made the OpenCompliance - CA Pay Data Edition tool free for a limited time.

How does this data collection help you? 

The state agency isn’t releasing the data publicly by organization, but it is releasing aggregated data by industry and region. Employers can compare their results to similar organizations to see how they rank in terms of hiring historically underrepresented people in certain jobs and salary bands.

The first report published by the California Department of Civil Rights analyzed 6.3 million worker data points, and found that women workers, Black workers, and Latina workers were overrepresented in the lower salary bands. Employers can begin to address this type of disparity using platforms like OpenComp. 

These 5 pay data reporting best practices boost your ability to remain in compliance

Sheri Kelleher’s company, Incorta, ran a pay equity report with OpenComp to get a better view of its pay data. It did this to not only remain in compliance with California’s new legislation by completing an accurate pay data report, but also so it could uncover any inequities and identify an action plan for addressing them. . 

According to that case study, if you focus on the five best practice areas below, you’ll have a much easier time submitting an accurate report, which could help you avoid financial penalties and legal action:

Scrub your data because its integrity matters. If you have hastily defined job levels, pay structures, job families, or job grades, your reporting will be meaningless. If you want useful data now and in the future, take the time to make sure your information is accurate. If you miss a deadline because your data isn’t up to snuff, you could be subject to significant penalties of up to $100 per employee, compounding with subsequent errors.

The framing of your internal communications is incredibly important when you’re conducting a pay equity report. Without the right framing, leadership and other employees may enter the conversation already on the defensive. Manager training is also important. Compensation questions are tough and managers need to learn how to respond. Prepare your people using FAQs and training opportunities.

Before you try to garner executive buy-in or engage in company-wide training, make sure you thoroughly understand your report and have actionable next steps. You should be able to explain how the report data is aggregated and what that means to your company’s plans, now and in the future. 

Furthermore, having a plan and a cadence for any future changes is critical. It allows you to make what is potentially a volatile process more reassuring for employees. Use OpenComp’s Pay Transparency Playbook to make trust the foundation of your plan.

Tell employees how you determined job leveling and grading, and explain how you’ll be transparent about any changes to compensation. You can access expert tips in our Definitive Guide to Compensation Clarity.

5. Compensation philosophy
Let people know what your compensation philosophy is and why your organization chose it. People want to know why they’re at the top or bottom of a pay grade. Providing that information allows you to build trust. Our Compensation philosophy 101 module in the Compensation Academy is a great starting point.

Some companies are just beginning to collect data, while others are throwing themselves into deep data analyses. Wherever you are, there are tools to help. Start by setting your compensation philosophy, then begin collecting data using a tool like OpenComp. You’ll quickly learn where you stand and where you can make improvements that take you toward greater equity and pay parity.

How do you adjust in a downturn?

Organizational change is common today and happening at a rapid pace. Many companies aren’t sure how to manage pay transparency, pay audits, and pay adjustments in turbulent times when budgets are stretched thin and current and potential employees have high expectations given the low level of unemployment and the high rate of inflation. 

Join OPEN Imperative to get a free pay equity report.

The four approaches below can keep your pay auditing and adjustment cycles on track, even in a downturn: 

Most organizations run pay audits annually, but more frequent audits may work better for you. (Quarterly audits are the gold standard.

2. Value
Transparency and authenticity can help you gain trust and implement change successfully at your organization.

3. Clarity
Communicate early and often. Get executive buy-in first, then move to management, then the rest of your organization.

4. Incremental change
You may not be able to immediately fill the gaps in pay parity at your organization, but you can get there in one or two years if you stay on a pre-set path.

Are you affected by the new pay data reporting legislation in California? If it seems daunting, don’t panic! OpenComps’ new tool, OpenCompliance - CA Pay Data Edition makes reporting easy. It lets you automate the otherwise time-intensive and error-prone process, so you’re able to report on time and error-free.

Sign up for free now!

Want to listen to this content? The presentation recording is here, along with other OPEN Summit sessions.