Gender pay gap reporting requirements on the way
After more than 40 years of equal pay legislation in the UK, the gap between women’s and men’s pay remains stubbornly high. According to data from the Office for National Statistics (ONS), the overall pay gap, based on earnings of full-time and part-time workers, has remained at 19.2% during 2014 and 2015. This means that, on average, women earn just over 80% of what men are paid.
In a consultation in 2015, the UK Government identified several factors which are likely to contribute to the gender pay gap – including the career aspirations of young women, the disproportionate impact on women of parenthood and other caring responsibilities, unconscious bias, a lack of women in senior roles, and the possibility that men are more willing to negotiate their pay than women. Not all of these factors can be influenced by employers, but the Government considers that pay transparency will help employers to address pay inequalities within their organisations.
The new reporting proposals
The Government has now published the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016, which will require businesses employing 250 or more people to publish annual information on the difference in pay between male and female employees. While employers have time to prepare, with the first reporting due by April 2018, the requirements are more detailed and onerous than many had expected.
The draft regulations have been subject to further consultation, which closed on 11 March 2016, and it is possible that they will be changed in some respects before they are implemented.
The main points from the current draft regulations are summarised below.
When do the regulations come into force? The regulations are due to come into force on 1October 2016. Affected employers need to take a snapshot of the data required to show the pay gap on 30 April 2017, with the first publication of the required report to be done by April 2018.
Who will they apply to? The proposals are intended to apply only to large employers in the private and voluntary sector – meaning those with 250 or more employees.
What will employers have to report? There are four main points to be reported:
- two “headline” gender pay gap figures – the difference between men’s and women’s mean pay and median pay, based on an hourly pay rate, for the employer’s pay period which includes 30 April each year;
- the numbers of male and female employees falling within each of four “quartile” pay bands in that period;
- the difference between men’s and women’s mean bonus pay in the 12 months to April each year; and
- the proportion of male and female employees who received bonus pay in that period.
What is the frequency of reporting? Reporting must be undertaken annually in April, and published within 12 months of each April date.
Where will data need to be published? The data must be published on the employer’s public website and kept there for at least three years.
Publishing the data
The report must be accompanied by a written statement confirming that it is accurate, signed by a specified senior person in the organisation – a director, Limited Liability Partnership member, partner or member of the governing body. Companies will need to think about who is the best person to do this and when and how to ensure it is on their radar.
The information then needs to be published on the employer’s public website in a manner that is “accessible” to all employees and the public. It must also be uploaded to a Government website (details of this are not yet available).
The report must be published within one year of the calculation date, so by the end of April the following year (with the first deadline being April 2018). There are various points to consider in terms of timing:
- If employers leave it until the deadline, the data will be quite old. This might actually be an advantage if the statistics do not look good but the employer has taken action since to improve matters (which can be explained in an accompanying narrative).
- The information must remain on the website for at least three years from the time of publication, so changes from year to year will be visible. Some employers may find it better to publish earlier if they are concerned about potentially difficult information, so they can remove it earlier too.
- There may be an advantage in publishing early anyway, in the interests of openness, especially if the statistics look relatively good.
There is no enforcement mechanism (the original idea of a fine of up to £5,000 has been dropped), but there are reportedly plans to publish sector-based league tables of the best and worst employers.
It may be tempting for some employers not to comply at all if their statistics look bad – but this may well lead to even greater damage to their reputation, and would be an obvious point that could be made in any subsequent equal pay or pay discrimination claims. The Government has also referred to a survey by the Young Women’s Trust, which reports that 80% of women aged 16 to 30 would compare employers’ gender pay data when looking for a job.
What should employers do now?
Although the first reporting does not have to be done until the end of April 2018, and there are a number of uncertainties that the Government will need to iron out before the regulations are finalised, we can be confident that the first report will relate to:
- the pay period containing 30April 2017 (for the mean and median pay gap and the pay quartiles); and
- the year from 1 May 2016 to 30April 2017 (for the bonus reporting).
We can also be fairly sure about the four things employers will need to report on:
- differences in mean pay;
- differences in median pay;
- differences in mean bonus pay and the proportion of men and women receiving a bonus; and
- numbers of male and female employees in quartile pay bands.
This means that employers can start to plan with a reasonable degree of confidence in relation to what they will need to report. This in turn will allow them to start thinking about how to address any issues thrown up by the data, whether by way of an accompanying narrative or changes to their remuneration processes.
One option for employers to consider is doing a “dry run” based on their payroll statistics for April 2016 (or possibly a different month) – i.e. a prototype of the report they will eventually need to publish. If the employer takes legal advice, such a review can normally be done under the cover of legal “privilege”, thereby reducing the risk of having to disclose unfavourable or unhelpful data.
Employers should start thinking about issues that might skew their statistics and additional information they could publish to put their report into context, for example:
- numbers of men and women in highly-paid senior positions;
- numbers of men and women who receive large bonuses;
- the age profile of their workforce (ONS figures from 2015 indicate a small pay gap for full-time employees up to 39, and a wider gap over 40);
- numbers of women on maternity leave and the level of maternity pay;
- barriers to earning shift premiums, commission or bonuses, e.g. anti-social or long hours which may disadvantage those with childcare responsibilities;
- splitting the workforce into different job roles or levels of seniority and producing additional figures for different groups.
In addition, the timeframe is such that there is still time for employers to think about 2016/17 salary reviews, how the use of bonuses might affect their figures, and whether there is anything they can still do to ensure that what they end up putting into the public domain looks more favourable. From a longer-term perspective, employers should consider what measures or initiatives they might adopt to help address any disparities, for example:
- review of salary structures and how salaries are negotiated and fixed on recruitment;
- recruitment initiatives to attract female candidates to senior positions;
- pipeline and succession planning to maximise the opportunity for female employees to progress to more highly-paid roles, which may include mentoring and training;
- considering flexible and part-time working arrangements in more senior roles, to avoid women plateauing in lower-paid roles where part-time work is more readily available;
- unconscious bias training for managers, to address the potential for discrimination in pay and promotion decisions;
- improvements to maternity pay/benefits, to improve retention of female members of staff
The article was first published on GlobalHRlaw.com, the ius laboris knowledge database.