The long-awaited draft regulations on gender pay reporting and the response to the government's consultation have now been published. In this update, we look at what the rules say and what this means for employers.
Which employers have to provide gender pay gap information?
The new rules are subject to a consultation process and so may change over the summer. The current draft regulations will apply to private employers and voluntary and public sector employers in the UK with at least 250 employees. We suspect, however, that this threshold will fall over time to match those in certain European countries e.g. 50 employees.
What pay information must be provided?
- Employers are required to publish both mean and median overall pay for each gender – but are not obliged to break these figures down by variables such as job type or grade, employees' location, or by full-time and part-time employees.
- Employers can provide additional context to the pay figures in supporting commentary but they are not required to do this.
- Some variable elements, such as overtime pay, do not need to be included, but others, such as bonus pay, shift premium pay and area allowances are included.
- Bonus payment figures must be included twice: firstly with the bonus element rolled up with other earnings to calculate the mean and median pay; and secondly bonus payments must be shown as separate statistics, showing the differences between the mean bonus payments made to men and women. This specific bonus reporting requirement has the potential to have a significant impact on insurance and financial services businesses.
- Employers will also need to report on the numbers of men and women in each salary quartile.
- Pay information must be provided in relation to all employees and workers.
When and where will gender pay gap information be reported?
- Employers with at least 250 employees will be required to calculate gender pay gaps using data from a specific pay period every April, from 2017 onwards and figures must be published within 1 year.
- The April 2018 reporting date that has been widely reported in the press gives employers a false sense of security. In fact, the information that must be reported by April 2018 relates to data captured in April 2017 – just over a year from now. This means that employers will need to carry out an audit of their gender pay data now, so that they have the opportunity to rectify any issues before having to capture the data in April 2017 and report it within the following 12 months.
- Employers must publish an updated gender pay report by April every year.
- All reports must contain a statement confirming that the information is accurate and should also be signed by a Director (or the equivalent) before being published on the organisation's UK website in a manner that is accessible to all employees and the public. Employers will also have to upload the information onto a government sponsored website.
How will the rules be enforced?
The Government has decided not to include any penalties in the new regulations. However, the risk of reputational damage arising from negative publicity over gender pay gap issues and employment relations risks will be more significant for businesses than this fine. Like the modern slavery statements, the gender pay rules aim to drive change through public pressure, by “naming and shaming”.
What do you need to do now?
- Establish whether your organisation will be caught by the new rules
- If it is, take legal advice about the type of information that you will need to gather and the consequences of your findings to benefit from legal advice privilege, protecting the confidentiality of the information. If you choose to collate the data without taking legal advice first, you risk creating evidence that could be used against you in an equal pay or discrimination claim, as well as creating data protection and confidentiality issues.
- Following on from taking legal advice, consider "getting your house in order" now to address the gap and address any risks well in advance of the reporting deadline which could lead to a smaller gap, and potential commercial opportunities as a result.
- Consider which director will take responsibility for signing off on the accuracy of the gender pay information.
- Then, by April 2017, gather together the first tranche of gender pay data for your organisation and then decide when, over the next year, is the best time to present it; as well as how you plan to present it. Consider whether you might want to disclose any additional information or explanation of the data, to put your findings into context.