In the wake of the attempt by Labour MP Sarah Champion to implement section 78 of the Equality Act 2010 by means of a Ten Minute Rule motion that prompted a ‘Made in Dagenham’ style rally outside Westminster, the government has sanctioned a Liberal Democrat amendment to the Small Business, Enterprise and Employment Bill to ‘activate’ section 78 of the Equality Act 2010. This means that private sector employers with 250 or more employees will be required to publish gender pay gap information, revealing the differences in the pay of male and female employees in their organisation. Non-compliance will amount to an offence leading to the imposition of a fine of up to £5,000 and/or enforcement action to ensure compliance.
Female full time workers are paid on average 9.4% less than their male counterparts, while the gender pay gap for part time workers is approaching 40%. The overall gender pay gap is 19.1%. Two years ago the gender pay gap increased. Last year it reverted to its previous downward trend but there is a concern that this may be more to do with the relative rate at which wages are falling in real terms than permanent positive progress towards gender equality in the workplace. In other words the fear is that the rate at which the wages of male workers is falling in the current climate is greater than the rate at which female workers is falling, giving a false impression that efforts to close the gender pay gap are working.
A more detailed analysis reveals that older female workers are particularly disadvantaged. Women earn 0.2% more than men in their 30s but 14% less than their male counterparts in their 40s with female managers aged 40-plus particularly affected, earning 35% less than their male equivalents, a difference of £16,680 a year, according to the 2014 Chartered Management Institute’s National Management Salary Survey.
There are different ways of presenting gender equality information with choices between a ‘median’ or ‘mean’ based analysis and the ability to focus on particular staff groups as an alternative to taking an organisation’s employees as a whole. It remains to be seen whether the Regulations will limit the extent of the flexibility in the assessment of and presentation of the relevant statistics. Section 78 notes that the Regulations may prescribe:-
- the description of employees;
- the method of calculation of the number of employees;
- the description of the information employers are obliged to publish; and
- the form and manner in which the information is to be published.
At the very least this is likely to include the full time gender pay gap, the part time gender pay gap and the overall figure. There may be a requirement for the information to also address average basic pay and total average earnings of both male and female employees broken down by job group and separately detailing particular elements of pay such as incentive and bonus payments. Regulations governing the manner in which the information has to be presented may result in there being little scope to present some of the information in a positive light.
The marked reluctance amongst larger employers to take action to achieve pay equality has prompted the government to force the issue. Only 270 of around 7,000 UK companies with more than 250 employees signed up to the Think, Act, Report Initiative. The Initiative introduced in 2010 was designed to accommodate the voluntary reporting by large employers of their gender pay statistics. To date only 5 organisations are actually publishing their gender pay details.
If organisations had a good gender equality story to tell they would be telling it. Either the story is not a good one or insufficient effort has been made to establish the position. Undertaking the kind of analysis that is required is time consuming and costly, and unlikely to have been viewed as a priority during the recession. It should now be viewed as a priority as the publication of gender pay details that highlight a problem does not just present a bad corporate image, it could prove to be very costly. Equal pay claims are notoriously complex and expensive to defend. It is not unusual for a large equal value claim to take 10 or more years to resolve. The ability of a claimant to seek compensation retrospectively for up to 6 years prior to the date of claim, and the tendency for multiple claims to be pursued can often mean that the amounts at stake are enormous.
An equal value claim has many layers of complexity in which the Claimant must establish less favourable treatment in respect of one or more terms of their contract of employment as compared with a suitable comparator of the opposite sex. If the reason for the differential is tainted by discrimination the question of whether it is objectively justifiable arises. There are many instances in which an apparent pay discrimination issue can be explained and legitimately defended.
The best way for employers to defeat an equal pay challenge is by understanding the gender pay situation within their organisation. They should then consider whether they would be able, if required, to explain and justify any apparent difference between the treatment of employees of one gender as compared with employees of the opposite gender.
This takes time, and the clock is now ticking. The new Regulations will be introduced within 12 months of the Small Business, Enterprise and Employment Bill becoming law giving employers probably little more than 18 months to get their equal pay act together.