The Equality Act (Gender Pay Gap Information) Regulations 2016 (Regulations) are expected to come into force on 1 October 2016. They will require employers with 250 or more employees to publish gender pay gap details highlighting the difference in gross pay and bonus payments made to female, as compared with male, employees.
The draft Regulations are currently available for consultation, but any changes are unlikely to be significant.
Who is affected?
The Regulations apply to private and voluntary sector employers in England, Wales and Scotland with at least 250 ‘relevant’ employees. A relevant employee means someone who ordinarily works in Great Britain under a contract governed by UK legislation.
The Government has said that it will bring in equivalent duties for non-devolved public authorities, by adjusting the public sector specific equality duties.
When is publication required to take place?
Although the first information must be published in April 2018, this will relate to:
- pay details in the pay period that includes 30 April 2017; and
- bonus pay details relating to bonuses paid between 1 May 2016 and 30 April 2017.
So, bonuses paid by employers in the next few months will fall to be taken into account in the first set of published figures. If the draft regulations take effect as expected, employers will be required to calculate the gender pay gap information in their business as at 30 April each year, and publish it within 12 months.
What is pay?
Pay will include basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances). It will not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arears of pay and tax credits.
What will need to be published?
1. Difference in mean pay
The mean gender pay gap is the difference between the average hourly earnings of the Gender pay gap reporting - what you need to know March 2016 employer’s female employees (taken as a single group) and the average hourly earnings of its male employees (again taken as a single group). Reflecting the full earnings distribution, the mean can be useful as women can be overrepresented at the low earning extreme and men over-represented at the high earning extreme.
2. Difference in median pay
The median gender pay gap is the difference between the mid-point value of hourly earnings of the employer’s female employees (taken as a single group) and the mid-point value of hourly earnings of its male employees (again taken as a single group). The median is the best representation of the ‘typical’ difference as it is unaffected by a small number of very high earners.
3. Difference in mean bonuses
The mean gender bonus gap is the difference in average bonus pay paid to men and women during the period of 12 months to 30 April each year and the proportion of male and female employees who received bonus pay during the period of 12 months preceding the relevant date. This average will take into account the full distribution of bonuses paid by an employer.
4. Proportion of men and women who receive bonuses
Employers will be required to publish the proportion of male and female employees who receive a bonus. This will identify scenarios in which one female employee is paid a very high bonus but all other female employees receive minimum bonuses and male employees receive similar higher bonuses.
5. Gender pay split between quartile pay bands
Employers will have to divide their overall pay range into four pay bands (based on their overall pay range), containing equal numbers of employees, and report the gender split in each of those four pay bands.
Where to publish?
The relevant gender pay gap details will need to be signed by a director or equivalent to certify them as accurate and be published in English on a searchable UK website that is accessible to both employees and the public, where it must remain for at least three years. In addition, the details must be uploaded to a Government sponsored website. This latter step will allow the Government to produce publically displayed tables or ‘league tables’, by sector, of employers’ reported pay gaps.
The introduction of mandatory gender pay gap reporting is an encouraging step in the fight against gender inequality and should lead to increased transparency. However, there could be concern about: • reputational damage and negative publicity; • the impact on employee attraction, engagement and retention; • the risk of significant financial damage resulting from employee claims for equal pay, which could include claims for up to six years’ back pay; and/or • what adverse impact the reporting could have on any procurement process. Action points for employers • Be proactive – understanding pay arrangements will help employers manage and present information meaningfully and in context. • Review all current pay practices across the business in order to understand the differentials which may exist. • Calculate and consider gender pay gaps which exist on a departmental/geographical/ functional level and compare these with the composition of the workforce. • Analyse the rationale behind the current arrangements to identify potential risk areas. • If pay gaps are due to underrepresentation of women at more senior levels, look critically at what the business is doing to attract, recruit, develop and retain female employees. How we can help Our employment specialists have over 30 years’ experience of dealing with equal pay claims, and can support businesses in complying with this legislation and carrying out an equal pay review. We can help by giving legally privileged input in: • calculating the gender pay gaps and salary quartile information necessary for compliance; • assessing the information, broken down by job function and different elements of pay, to understand the causes of any gap; • advising on the scope for justifying any gap and/or high risk factors in the context of a potential equal pay challenge; • helping employers to remedy any gaps, and • putting together a communication and reporting strategy, to include a narrative to sit alongside and explain the published information.