For the first time the Government has published full details of the new requirement for employers to report gender pay gap information. The requirement will impact all private sector employers with 250 or more UK employees, with the first reporting to take place in April 2017.
Long overdue, the Government's response to the consultation on "Closing the Gender Pay" was published this morning, along with the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016. The headlines are as follows:
- Scope - All private and voluntary sector employers in England, Wales and Scotland with at least 250 employees will be required to publish gender pay gap information.
- Timing - The Regulations are expected to take effect in October 2016. Employers will be required to prepare a preliminary data snapshot showing the position as at April 2017. The detailed pay gap information must then be calculated and published by April 2018 at the latest, on a date of the employer's choosing. The obligation to report will apply on an annual basis going forward.
- The Requirements - The specific publication requirements are as follows:
- the key measure is the publication of the overall mean and median gender pay gap, using an hourly pay rate for each relevant employee
- "pay" for these purposes will include basic pay, paid leave, maternity pay, sick pay, most allowances, shift premium pay and bonus. However pay will not include overtime, the value of salary sacrifice schemes and benefits in kind
- there is a separate requirement for employers who operate bonus schemes to publish the difference between the mean bonus payments made to men and women
- there is also a requirement for employers to report on the number of men and women in each quartile of their pay distribution – this is intended to illustrate where female employees are concentrated in terms of their remuneration and if this indicates any impediments to career progression
- employers can publish a narrative to accompany the pay gap information, however this is a voluntary step
- Accuracy & Publication – The gender pay information detailed above must be published on a searchable UK website which is accessible to employees and the public, and must be maintained for at least three years in order to permit the tracking of progress. The information must also be uploaded to a Government website which will be used to monitor compliance (see below), and will be used to prepare and publish tables showing pay gaps within particular sectors. Significantly, the Regulations require a director (or equivalent) to sign and confirm that the published information is accurate.
- Penalties – The plan to introduce a civil penalty in the form of a fine has been replaced with a focus on publicising those employers who comply, and potentially naming and shaming those employers who fail to comply. There is no specific penalty for non-compliance. This will be kept under review.
The draft Regulations are subject to a consultation process which will close on 11 March 2016, but it is unlikely that any of the fundamental measures will change.
What does this mean for employers?
After speculation on whether the Government was going to abandon mandatory gender pay gap reporting, it is clear that annual pay gap reporting will become a reality for employers within the very near future. Despite the limited penalties for non-compliance, it is not an option for those employers within scope to ignore the new reporting requirements. In particular, for larger employers with complex pay structures, the analysis will take time to complete and proper consideration will also be needed around the creation of an action plan to tackle any pay gap issues and to prepare the narrative that will accompany the publication of the raw figures. In light of the requirement for a statutory director to sign off on the accuracy of the information, this issue should already be on the board's agenda.