Whatever the political hue of the next Government, there is one thing we can be sure of: by March 2016 new regulations will be in place that will require larger employers in the private and third sector to publish details of their gender pay gap ie the difference in pay between male and female employees.
The new rules, which will come about as a consequence of the Small Business, Enterprise and Employment Act 2015, will not apply to organisations with fewer than 250 employees, nor to public authorities listed in schedule 19 of the Equality Act, who are required to comply with the public sector equality duty and, therefore, already have broader equality obligations than most other employers. Further details of the new requirements, including precisely what will need to be reported and where the information must be published, will be determined by the new government after the election and following a public consultation. The options under consideration are likely to include whether employers should simply be required to report the single figure difference between the median hourly earnings of men and women, or whether they will have to go further, for example by recording the difference between the average basic pay and total average earnings of men and women by grade and job type.
Many employers will be concerned that highlighting pay differences in this way could leave them exposed to equal pay claims or damage their reputation for fair treatment. However, a failure to comply with the new rules could cause even greater reputational damage: defaulters are likely to be easy to identify and unions, campaigners and the media could well be keen to name and shame those who try to keep their gender pay record under wraps, particularly in the case of well known brands and those competing for work in the public sector. A failure to comply is also likely to be treated as a criminal offence, for which the penalty will be a fine of up to £5.000.
Since 1 October 2014 Tribunals have the power to order an equal pay audit where an employer has breached equal pay law, with a power levy repeat fines for non-compliance (read more). Whilst few equal pay claims result in a tribunal finding, compulsory gender pay gap reporting will inevitably bring increased transparency (and scrutiny) of the pay practices of larger employers.
What to do now
Many employers will be keen to get their houses in order before being exposed to public scrutiny. If you are one of those employers, here are some practical suggestions to help you prepare:
- Be proactive – doing nothing is not an option. Understanding your pay arrangements will help you manage and present information meaningfully and in context;
- Review all current pay practices across your organisation in order to understand the differentials which may exist;
- Consider gender pay gaps which exist on a departmental/geographical/functional level and compare these with the composition of your workforce;
- Analyse the rationale behind your current arrangements to identify potential risk areas;