Mandatory Gender Pay Gap Reporting – Government Consultation on Draft Guidelines

We previously reported on the Government’s aspiration to “end the gender pay gap in a generation.” One of the ways they hope to achieve this is by requiring employers to report data on pay. A draft of the Equality Act 2010 (Gender pay Gap Information) Regulations 2014 (the Regulations) and a timeline for implementation have now been released by the Government Equalities Office providing employers with clarity on their obligations. The consultation on the draft Regulations will run from 12 February 2016 until 11 March 2016 and the Regulations are expected to come into force on 1 October 2016. Given the short period of consultation we suspect that the Government do not intend to make many changes to the draft Regulations.

Who will be obliged to report?

Employers with at least 250 employees in Great Britain will be required to publish mean and median gender pay gap figures, gender bonus gap figures and breakdown of men and women in receipt of bonus payments as well as a table with the number of males and females in quartile salary bands.

Separately, the Prime Minister announced that they will extend mandatory reporting to the public sector, and another consultation will launched with relevant bodies shortly to ascertain how those requirements will work in practice.

What is the timeline for calculations and reporting?

The draft Regulations will require employers to calculate gender pay gaps using data from a specific pay period. The publication of the first pay gap figures must take place within 18 months of the Regulations coming into force, with annual publication thereafter. Employers will have to review pay in April 2017 and provide the first publication of the gender pay gap figures in April 2018.

What is Pay?

For reporting purposes, “pay” includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other benefits (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances). It does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.

What information must be published?

There are five different types of information an employer must publish which are set out below.

  1. The difference in mean pay between female and male employees expressed as a percentage.
  2. The difference in median pay between female and male employees expressed as a percentage.
  3. The difference in mean bonus pay between male and female employees during the 12 months preceding (i.e. 30 April 2015 to 30 April 2016).
  4. The proportion of male and female employees that received a bonus.
  5. The number of men and women in each pay quartile. They will calculate their own salary quartiles based on their own overall pay range.

The objective is to not only identify the pay gap but to also identify the numbers of women and men in each quarter by the overall pay distribution. It is believed that this will help employers consider where women are concentrated in terms of their remuneration and if there are any blockages to their progression. The Government also believes that the median is the best representation of the typical difference as it is unaffected by a small number of very high earners.

How to ensure compliance?

A written statement confirming that the information is accurate must accompany the results. Employers must upload the data in English on a searchable UK website that is accessible to employees and the public. The data must be published within 12 months of calculating the figures (i.e. by 30 April 2018). Employers will be required to retain this information online for three years in order to show progress made. Employers must also upload the information to a government-sponsored website. Companies that fail to address their gender pay gap will be highlighted in new sectoral league table that will rank whole sectors against each other. Interestingly, the draft Regulations do not specify any penalties for failure to report the gender pay gap.

What will be the impact?

7,960 businesses and 11.3 million employees in Great Britain (34% of the UK workforce) will need to publish the data specified.

The Government believes that transparency will provide greater workforce insight that will prompt change in workplace cultures that have historically favoured men, including unconscious bias. The data could flag up instances where they seem to pay women less than men in the same types of roles; however, a difference in pay between men and women does not in itself show evidence of discrimination.

The Regulatory Policy Committee has assessed the impact of the proposals on business and believes that there are quantifiable familiarisation costs, training costs, calculations and publication costs. What is unknown is the cost to firms seeking legal advice prior to publication due to concerns over increased discrimination actions and the reputational effects of misleading results. It is likely that organisations will seek legal advice and also develop a communications strategy around the publication of this data.

What Employers need to do?

Employers need to take action now to prepare for this change. The first pay period for data to be analysed is April 2017, however, this task is likely to place a large administrative burden on employers.  Employers should consider whether or not they have the resources available to complete the task by identifying individuals with a good understanding of equal pay principles and the law who have the skills to collect and analyse the data.  Members of the HR team may need training to ensure they are made capable of conducting an Equal Pay Review. Furthermore, employers must also consider what action they should take if they are aware of existing gender pay gaps. Employers may wish to take proactive steps now to rectify any pay discrepancies before they are required to publish pay information relating to the period April 2017.

Our Employment team can assist with conducting a legally privileged Equal Pay Review which would not be subject to disclosure in any legal proceeding. We can help assess risk and work with employers to focus equality initiatives to close any gap.

For more information on how to address issues relating to gender pay discrepancies, please contact a member of the Devonshires Employment Team.

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