As part of the Government’s commitment to close the gender pay gap in one generation, the draft Gender Pay Gap Information Regulations 2016 (due in force in October 2016) will make those employers of 250+ employees think about what action they may need to take to increase gender pay equality over the next 18 months.

THE MEASURES BEING USED

After significant consultation, the regulations have been drafted to require those larger employers who are in scope to publish overall gender pay gap figures, calculated using both the mean and the median.  These measures are intended to give employers “a better understanding of any gender pay gaps they identify” and greater “depth to the analysis”. The “mean” is the commonly understood calculation of the average.  As the middle value in a list of numbers, the “median” disregards small numbers of very high and low earners in the business.

It seems unlikely, at least in the next five years, that employers with less than 250 employees will be brought within the scope of the legislation.

DEFINITION OF PAY

“Pay”, for these purposes, excludes overtime, because often men are able to work overtime more easily than women.  While women should have equal opportunity to work overtime, that is still to be addressed. Publishing gender pay gap data by grade (or job title) has also been disregarded as many employers may not have an appropriate grading structure and also the data could become confused on a merger or acquisition.

There is no requirement to publish separate gender pay gap data for full and part time employees, even though women are more likely to be working part-time. Employers are to calculate the data for each salary quarter; it is for the employers to calculate the relevant quartile.

Transparency in gender pay gap analysis permits comparability between employees in one organisation and comparability between employers. It is intended to provide good practice initiatives which will lead the way for all employers.

COMPARABLE DATA

Comparable data is to be taken between a “snapshot” of data in April 2017 and data taken at any later date, to be determined at the employer’s discretion, within the subsequent 12 months, i.e. no later than April 2018. During this period, bonuses paid should be factored in; it is recognised that bonuses significantly contribute, particularly in the financial services sector, to a larger gender pay gap. 

Employers are encouraged to contextualise their gender pay gap data, provide a narrative, as well as information on the positive steps they have taken.

Data is to be published on a searchable UK website as well as provided directly to the government on an annual basis. Reporting any less frequently could result in lost momentum to positive changes to improve the gender pay gap.

COMPLIANCE MECHANISMS

There is no additional compliance mechanism than that which already exists under the Equality Act 2010 under the draft regulations. It is described as “positive compliance regime” in the notes to the draft regulations.  Mainly, this means that employers who are leading the way, will be highlighted and praised by the government. 

There is potential for non-complying employers to be “named and shamed” as a result of periodic checks to assess the non-compliance. This process is favoured over any additional civil penalties as a result of the perceived success of the voluntary reporting scheme. 

Six years ago, the uptake on the voluntary reporting scheme was low. Now, over 300 employers have signed up and have analysed, reported and taken action in accordance with the ACAS “Think, Act, Report” Guidance of 2010.

COSTS OF REPORTING

Costs of the reporting must be borne by the employers, who, according to the government, are likely to have over-budgeted for the cost of implementing these regulations in the run up to them coming into force. The message is intended to be that the regulation is not as prescriptive as it could have been.

WHAT TO DO NOW

Right now employers will need to consider how they will undertake their audit and consider whether the audit and current pay structures throw up any equal pay issues. If so, are there any reasons that may justify the pay differential? If not, what measures need to be put in place to deal with any disparity? 

Communicating with employees about the process and the outcome is important.  Employers may want to seek advice on what voluntary statements could be included in any final public report to be made in compliance with the new regulations.

KEY FACTS AT A GLANCE

  • Will apply to employers with 250+ employees.
  • That’s approximately 34% of the total GB workforce.
  • 7,960 employers with approximately 11.3 million employees.
  • The scope of it will be reviewed within five years.

Originally published in Purely Payroll, March 2016