Gender pay gap reporting for businesses and third sector organisations with over 250 employees will start from April 2017 and means that those 'qualifying' employers will need to publish gender pay details annually to provide a 'snapshot' of pay. This will present a number of challenges for employers, especially HR Teams, who will take the administrative burden to ensure compliance with the obligations.
There has been much debate around the gender pay gap with particular focus on breaking down the data to show that the gender pay gap increases depending on age and seniority. For example, the pay gap starts to widen significantly when a woman reaches 39 suggesting that women are disadvantaged in terms of pay during their child rearing years. The Institute for Fiscal Studies (IFS) recently published data to show that the gap widens for the 12 years after the birth of the first child. Data from the Chartered Management Institute (CMI) shows that average pay for male managers is at £38,817 against average pay for female managers of £29,853. Although the overall gender pay gap has over the years reduced it still remains significant at around 18%.
What are the obligations?
Employers who qualify will need to publish gender pay gap figures on an annual basis using both mean and medium hourly pay. The information will need to be set out across a breakdown of men and women across four (quartile) pay bands. Bonus pay will need to be reported across the full 12 month period as well as the proportion of male and female employees who received bonuses in the same 12 months.
The details will need to published on the employer's website and uploaded to a government backed website.
What factors must HR consider?
There are a number of factors that will need to be considered according the draft regulations - not all of them straight forward. These include:
1) Who is included in the 'employee' headcount. It is considered likely that casual workers, zero paid staff, contractors, partners and LLP members will be included but that agency workers and those based permanently overseas will not - although the matter has yet to be clarified.
2) Employees on sick leave, maternity leave or any other type of family leave will be included and their pay will be the rate paid while on leave.
3) Defining 'pay' is also a challenge and while there is some clarity over what this will include it is limited and there are uncertainties around salary sacrifice schemes, termination payments (excluding redundancy pay) and family leave pay other than maternity.
4) There is a separate obligation to report bonuses over the 12 months as well as including bonuses in the generic 'pay' figure which will mean that bonuses are reported on twice.
5) The separate obligation to report bonuses where they are 'received and earned' will cause particular confusion where bonuses are earned in one period but deferred until payment in another period such as in the financial sector.
6) The gender pay gap will need to be calculated and published by qualifying employers annually each April from 2017. It is not straightforward as there are many factors that can distort the payment such as working out what 'basic hours' the average pay should be based upon and how to deal with overtime payments.
7) A decision will need to be made on the voluntary accompanying narrative to the published figures.
Penalties for non-compliance?
The regulations do not contain any penalties for non-compliance in spite of at least two thirds of the respondent's to the consultation saying that there would need to be some penalty to ensure compliance. It seems that for the moment at least the Government is expecting the impact of not want to be seen publically as having a poor rating on gender pay gaps as a driver for compliance.
Employee Relations issues that might arise?
The figures are a snap shot of one month and can be misread if the factors that may influence a pay gap are not fully understood. For example if there are a high number of female employees on maternity leave at any one time then the average pay for women would most likely be bought down.
Employers who have persistent poor performance on the gender pay gap may experience a decline in the recruitment of female staff as they favour employers with a better ratio.
For the established workforce, friction could arise if the employer delivers consistently poor results on the gender pay gap and lead to grievances and claims of equal pay by individuals or groups of workers.