New California SB 1162 Pay Data Reporting Example & Requirements

California has introduced a new Senate Bill 1162 and it could effect businesses that are not located in the state of California. Employers who employ one employee from the state will be required to file a Payroll Employee Report. Find out the new employer requirements to avoid penalties and fines.

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California SB 1162 Basics

What issue is SB 1162 aimed towards?

California legislation has enacted this law in hopes of fixing the pay gap, equal pay for equal work. To quote

[d]espite significant progress made in California in recent years to strengthen California’s equal pay laws, the gender pay gap persists, resulting in billions of dollars in lost wages for women each year in California. Pay discrimination is not just a women’s issue, but also harms families and the state’s economy. In California, in 2016, women working full time, year round made a median 88 cents to every dollar earned by men, and for women of color, that gap is far worse. Although there are legitimate and lawful reasons for paying some employees more than others, pay discrimination continues to exist, is often ‘hidden from sight,’ and can be the result of unconscious biases or historic inequities.

California sb 1162 notice

The legislation hopes that since employers are required to submit this information, employers will see issues in their pay distribution they may have not been aware of and take action against pay discrimination.

When is SB 1162 due to the state of California?

SB 1162 pay data report is due by the second Wednesday of May each year, beginning on May 10, 2023.

Which employees must be reported to California?

Business with more than 100 employees (nationwide) AND employ at least one individual in CA MUST report Pay Data Reporting. This does include remote workers.

What are the new requirements covered by SB 1162 that SB 973 did not cover?

Previously employers were only required to submit a Payroll Employee Report only if the had to file a federal EEO-1 report. The new 2023 requirements requires private employers that employ over 100 employees to file a Payroll Employee Report.

  • Previously employers were only required to submit a Payroll Employee Report if they filed a federal EEO-1
    • 2023 requires private employers that employ over 100 employees to file a Payroll Employee Report
  • Private employers who employ 100 or more employees hired through labor contractors within the prior calendar year to file a Labor Contractor Employee Report
  • Payroll Employee Reports and Labor Contractor Employee Reports include the mean and median hourly rate of employee groupings
  • Employers can no longer only submit a federal EEO-1 report to satisfy SB 1162 requirements
  • CRD may now penalize employers as well as contractors who do not provide the required information to the employer in a timely manner

How does an employer get an establishment number to report on the Pay Data Report?

In previous years it was up to the employer to get an establishment number prior to submission. However, new this reporting year of 2023 the Civil Rights Department (CRD) will automate the creation of establishment IDs.

Are there penalties for not filing SB 1162?

Yes, there are penalties for not filing. If the state of California finds an employer who did not meet the requirements and file with that state. The Division of Labor Standards Enforcement (DLSE) may impose a fine between $100- 10,000 per violation.

Action may not be taken against the employer for their first offense. As long the the employer can prove they have updated any job listing with all the required information including pay rate.

Frequently Asked Questions about California SB 1162

Will the employers SB 1162 (Pay Data Reporting) be available for the public?

No, this information will not be available to the public. According to Government Code section 12999(i) which prohibits the Division of Labor Standards Enforcement (DLSE) from making these reports public with any identifiable information including the employers and any employees within the Pay Data Reporting.

How long will the Pay Data Reporting information be kept after submission?

California will keep the reports for a minimum time span of 10 years according to Gov. Code § 12999(l)

How long does the employer need to keep the data reported in Pay Data Reporting?

Employers are required to keep records going back 2 tax seasons.

My business is located in California, but the employee does not reside in CA. Is this employee required to be included in the report?

Yes, the out of state employee must still be included in the report. The reason for this is because, the employer is established in CA therefore must include all employed employees during their selected snap-shot time frame. Even if some employees do not reside in California. The employees report to a CA establishment.

What if an employee lives in California, but does not work in California. Should this employee be included in Pay Data Report?

If the employee lives in California but when physically reporting to work, reports to an entity outside of California. Then this employee is not required to be included on the Pay Data Report. Pay Data Reporting is for employees who work inside the state of California, not for individuals who only live in California.

What if a California entity has other smaller entities outside the state of California, should the smaller entities with less than 100 employees be included in Pay Data Reporting?

Yes, the smaller entities and their employees will have to be included on the SINGLE Pay Data Report submitted to CA. The main establishment is located in California, while the smaller ones may not be located in same state they still report to the main office. Therefore, no matter their physical location all employees of the smaller establishments must be included in the report.

What if my businesses is a smaller entity of a larger corporation?

If the smaller employer employs less than the requirement of 100 employees, but combined with the larger corporation does exceed 100. This would make both businesses fall under one entity and Pay Data Reporting will be required if any employee worked in the state of California.

What if the employee got a Corrected W-2, should the employer use that corrected amount in the Pay Data Report?

This one is a little more tricky to try and get accurate payment amounts.

If the employer has already filed their Pay Data Report with the state of CA before a Corrected W-2 was issued to the employee, an update to the Pay Data Report would only be necessary if the new amount would move the employee out of the originally reported numeric pay band.

However, if the numeric value does change the employer must mark the previous submission as incorrect in the portal. Then upload a new Pay Data Report in order to have the most accurate information.

If the employer has not filed their Pay Data Report with the State of CA and issued a Corrected W-2 to an employee. The employer should use the amount in the W-2C to get the numeric pay band.

Which states other than California have adopted their own type of Pay Data Reporting?

While California is entering its first year of Pay Data Reporting other states which include

  • Colorado
  • Washington
  • New York City

have already adopted this type of requirement for employers.

While these states have had laws in effect from previous years, none of the states require an actual Pay Data Reporting file. These states laws effect more of the job listing opportunities and transparency.

California SB 1162 – SnapShot FAQ

How do I select a time frame of the employee salary ranges?

Employers must report on their workforce by choosing a single pay period—or “snapshot period”—from the fourth quarter of each reporting year (which is currently 2022). Between the dates of October 1st thru December 31st.

What is the purpose of making the employer choose a SnapShot?

Employers can choose any pay period between the months of October 1st – December 31st.

Of course not all employers follow the same pay schedule i.e. weekly, bi-weekly, or monthly. The SnapShot is important for the employer to determine which individuals are required to be reported on. Employees change throughout the year, by using a fixed period this makes reporting on employees must easier to see who falls into the CA reporting requirements.

While it may seem confusing selecting a snapshot pay period for their employed employees, it does not matter if the employees were actually payed during the pay period. The important part is to see all the employees who were employed.

This SnapShot period is not used to determine the hours worked or their pay.

What classifies as an employee once a SnapShot period is selected?

According to California Government Code section 12999(m)(1) an employee is classified as:

an individual on an employer’s payroll, including a part-time individual, whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes from that individual’s wages.

By this definition this would include part time, full time, and temporary employees. Even those employees who were provided from a hiring agency.

What if the SnapShot the employer uses does not have a California resident during this time frame?

Officially California does not specify the employee must have been employed for the whole year in order to qualify as reporting is required for the employer. If the selected time frame does not include any CA employees, then reporting is not required.

What if the SnapShot the employer uses has an individual who is no longer currently employed. Should that employee still be included in the report?

Yes, that employee who is no longer currently employed, but was employed during the SnapShot must be included in the Pay Data Report. As the time frame of the SnapShot classifies who must be reported on.

In another scenario if an employee was fired in the middle of the SnapShot, this employee must still be included the in Payroll Employee Report.

Labor Contractor Info

How to report Labor Contractors on the Pay Data Report?

Filing a Labor Contractor Employee Report is a specific filing type that different from the Payroll Employee Report. These are two separate submissions and employers could have to file both or only one or the other. Each employer must handle this on a case by case basis.

According to Senate bill 1162, private employers who employed more than 100 labor contractors in the previous calendar year, 2022, and at least one contractor is based out of California. Will be required to file a separate “Labor Contractor Employee Report”.

The Labor Contractors will be filed separately from the Pay Data Report and will include all of the hired contractors from the past calendar year. Do not file a report for each contractor hired. All hired contractors will appear on one submission of the Labor Contractor Employee Report.

How to find the total number of labor contractor employees?

For this example an employer hired a contractor to do some construction work. The hired contractor has a total hired contractor employee count of 150 but only 25 workers are assigned to work on this employers site. When it comes time find the Labor Contractor Employee Report and if they will be required to file or not, the answer will be YES.

The employer will be required to file because the contractor they hired for construction has a total labored contractor employees of 150 and the deadline for filing is 100. Even though only 25 contractors were assigned to this job all 150 contractor employees must be included in the report. It will also be the requirement of the contractor to supply all the necessary information to the employer or risk being fined.

What if the employer is required to file a Labor Contractor Employee Report, but does not have the required information about the contractor?

According to Senate Bill 1162, it will be a requirement for the employer’s labor contractors to provide necessary data and information to the employer submitting the report, as well as requires the employer to identify their labor contractors

If a Labor Contractor Employee Report is required, how does the employer select a SnapShot for the contractor?

It is recommended the employer work with the contractor to select a single SnapShot which will be used for that one specific contractor. If the employer has more than one hired contractor that must be reported on in the single Labor Contractor Employee report. Then the employer must work with each contractor separately to find a SnapShot period.

Importantly, each contractor does not have to follow the same SnapShot period. This period may be different between contractor A and contractor B.

What if the contractor does not supply the required information to the employer to file a Labor Contractor Employee Report?

According to Senate Bill 1162 it states, penalties will be given out to any any labor contractor that fails to supply necessary data to a client employer.

Completing the Report – FAQ

What are the different types of grouping categories required in the Pay Data Reporting?

  • Job category
  • Sex
  • Race
  • Ethnicity

How are the employees grouped once all the data has been gathered for all employees?

Employee grouping can begin after each employee has the following columns:

  • Job category
  • Pay band
  • Hours worked
  • Sex
  • Ethnicity
  • Race

Group the employees that share the same job category, pay band, race, ethnicity, and sex. Then add all the hours together of each employee to get the total amount of hours this group worked.

This whole group will be reported as one row in the Pay Data Report.

What are the different race and ethnicity guidelines that should be followed when reporting to the state of California?

In order to not confuse employers who may have reported a similar federal report EEO-1. The same guidelines will be followed and are as following:

  • A10 – Hispanic/Latino – Male
  • A20 – Hispanic/Latino – Female
  • A30 – Hispanic/Latino – Non-Binary
  • B10 – Non-Hispanic/Non-Latino – Male – White
  • B20 – Non-Hispanic/Non-Latino – Male – Black or African American
  • B30 – Non-Hispanic/Non-Latino – Male – Native Hawaiian or Other Pacific Islander
  • B40 – Non-Hispanic/Non-Latino – Male – Asian
  • B50 – Non-Hispanic/Non-Latino – Male – American Indian or Alaskan Native
  • B60 – Non-Hispanic/Non-Latino – Male – Two or more races
  • C10 – Non-Hispanic/Non-Latino – Female – White
  • C20 – Non-Hispanic/Non-Latino – Female – Black or African American
  • C30 – Non-Hispanic/Non-Latino – Female – Native Hawaiian or Other Pacific Islander
  • C40 – Non-Hispanic/Non-Latino – Female – Asian
  • C50 – Non-Hispanic/Non-Latino – Female – American Indian or Alaskan Native
  • C60 – Non-Hispanic/Non-Latino – Female – Two or more races
  • D10 – Non-Hispanic/Non-Latino – Non-Binary – White
  • D20 – Non-Hispanic/Non-Latino – Non-Binary – Black or African American
  • D30 – Non-Hispanic/Non-Latino – Non-Binary – Native Hawaiian or Other Pacific Islander
  • D40 – Non-Hispanic/Non-Latino – Non-Binary – Asian
  • D50 – Non-Hispanic/Non-Latino – Non-Binary – American Indian or Alaskan Native
  • D60 – Non-Hispanic/Non-Latino – Non-Binary – Two or more races

Which genders does the state of California recognize?

For the purpose of reporting SB 1162 California allows the following genders to be entered into the report.

  • Male
  • Female
  • Nonbinary

Employers may use the employees self-identification as classification. If an employee does not want to provide this information it will be up to the employer to use their records and be judge to make a classification. This field may not be left blank.

Exceptions to leaving the gender field blank

The gender will always be required when submitting a Payroll Employee Report. However, when submitting a Labor Contractor Employee Report the gender may be left blank as this information may truly not be known if the contractor does not have the necessary records on this contractor before the deadline.

This exception should not be expected going forward after reporting tax season 2022.

What are the different categories employees can be labeled as?

There are 10 different job categories employees can be recognized as

  1. Executive or senior level officials and managers
  2. First or mid-level officials and managers
  3. Professionals
  4. Technicians
  5. Sales workers
  6. Administrative support workers
  7. Craft workers
  8. Operatives
  9. Laborers and helpers
  10. Service workers

Notice how each job title will fall under a numeric value when it goes time to report grouped job category on the Pay Data Report. This makes it easier to report each row as quick bursts of data and not read out fields.

How should the employer measure pay to classify employees pay bands?

Employers should use their employees W-2 Box 5 Medicare Wages and Tips. However, if any employee has wages not reported in Box 5, as may be the case for an H-2A visa holder for example, use W-2 Box 1 for that employee and note this in the associated remarks field.

Should each employee have their exact salary in the report?

When reporting an employees salary exact numbers are not required. Instead they use “Pay Band” which only reports a digit. That digit is then related to a SALARY RANGE.

What are the employee pay bands or salary ranges?

An employee pay band is used to assign a numerical number associated with their pay range.

  1. $19,239 and under
  2. $19,240 – $24,959
  3. $24,960 – $32,239
  4. $32,240 – $41,079
  5. $41,080 – $53,039
  6. $53,040 – $68,119
  7. $68,120 – $87,359
  8. $87,360 – $112,319
  9. $112,320 – $144,559
  10. $144,560 – $186,159
  11. $186,160 – $239,199
  12. $239,200 and over

Should the employer use the annual amounts of the employee if the employee did not work the whole reporting year?

No, the employer will use the amount of W-2 Box 5 to calculate that employees pay band. If the employees annual pay band would put them in a higher numeric pay band but the amount of Box 5 is lower. The employer should use the lower range to get the numeric pay band.

For example if an employee’s annual salary is 150,000 but they were terminated early and their report only shows 70,000. According to the pay band above, this employee would fall under number 7 and not number 10.

If you’re looking for a comprehensive guide on completing the W-2 we recommend checking out our essential guide.

How to calculate the employees total hours for the Pay Data Report?

The employer must calculate the total hours worked for each employee. Each employee hour total includes the amount of hours worked and the amount of hours the employee was on paid or unpaid leave. This time includes

  • Vacation
  • Sick
  • Holiday
  • Mandatory leave
  • Pregnancy
  • Any other employer-approved leave of absence

If no such records exist for this time calculation, the employer can get the employees total hours by multiplying the total number of days actually worked during the Reporting Year, (make sure tot include the paid days leave) by the average number of hours worked per day by the employee.

This method of multiplying must be done for each employee and cannot be used as a placeholder value when calculating the hours for all full-time employees.

California does not expect the total hours worked to be an exact number, but for the employer to make a reasonable estimation on a case by case basis.

Calculate the Employee Mean of a category – Example

Employers should group the each category of employees by

  • Establishment number
  • Race/Ethnicity
  • Job category
  • Sex combination

Once all the employees are in a matching category, the mean is then calculated by adding each employee’s hours together to get the sum, then divide by the total number of employees within this same category.

Pay Data Reporting Calculate Mean Hourly rate
New California SB 1162 Pay Data Reporting Example & Requirements 5

However, if this combination of categories only yields one employee, then the employees hourly wage should be reported as is without any modification.

Calculate the Employee Median of a category – Example

Employers should group the each category of employees by

  • Establishment number
  • Race/Ethnicity
  • Job category
  • Sex combination

Once all the employees are in a matching category the first step is to order all the employees hours from smallest to largest. Then find the number that is in the middle and use that number to get the median.

Pay Data Reporting Calculate Median
New California SB 1162 Pay Data Reporting Example & Requirements 6

However, if this combination of categories only yields one employee, then the employees hourly wage should be reported as is without any modification.

Should the employer use the whole year to calculate the employees total hours?

No, the employees hours should be based on the amount of days the employee actually worked while including estimated hours for paid leave.

If an employee only worked for 50 days, while not taking any vacation or sick days, with an average work day of 5 hours. Then this employee would have a total work hours of 250.

Now what if the same situation occurred for another employee working the same amount of days but this time took 2 vacation days. Simply multiple 2 by 5 to get 10, then add 10 to 250 to get 260 total hours worked for this employee.

Which individuals part of the employer have the authority to certify a Pay Data Reporting?

Employers have choose to have an external business generate the Pay Data Report and can submit on their behalf, but not before being approved and certified from the employer. The employer may choose this individual at their own will. However, this individual must possess the knowledge to review the Pay Data Report and verify all this information is accurate on behalf of the employer.

Should non-California residents be included in the Pay Data Report?

Employers can choose to include every employee in the report however, ONLY the CA employees must be reported on.

Employees hired from labor contractors or staffing agency must be included?

Employers must file a separate annual wage data covering these employees. This report must include all the ownership names of the agency that supplied employees.

Conclusion

With this comprehensive article we made it our goal to try and get employers the most up to date and accurate information available. This new Senate Bill 1162 is new for the year 2023 leaves many questions on the table for employers. Make sure to check back here for updates as they come out. This article will be updated as more and more is released!

BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.

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