Employers may not yet have fully appreciated the retrospective reporting required by the new gender pay legislation. The draft regulations require that bonuses paid out in the coming bonus year be disclosed by organisations with 250 or more employees.
The calculation and payment of bonuses is often an opaque process, in many organisations is shrouded in secrecy. However, that veil is about to be lifted with the introduction of the new regulations, later this year requiring larger organisations to publish a gender pay report including information on bonuses.
The Equality Act 2010 (Gender Pay Gap Information) Regulations (the Regulations) are expected to come into force in October 2016. The Regulations are currently in draft form so it may be that some changes are made before they come into force. However, they currently provide (and this is unlikely to change) that organisations have until 29 April 2018 to publish their first gender pay report. While this may seem a long way off, data relating to bonus years starting from 30 April this year will be caught by the new regime.
This is because the first 'data snapshot' date for relevant organisations will be 30 April 2017. This is the date on which employers will be required to calculate their gender pay gap even though they will have until 29 April 2018 to publish the actual report. The data requirements for bonus pay requires organisations to look backwards over the preceding 12 months, bringing us back to April 2016.
Employers therefore need to be prepared that their decisions in the coming year will be subject to public scrutiny.
Under the Regulations it is envisaged that employers will publish an annual gender pay report on their website (and keep it there for three years) which includes the following information on bonuses:
- The difference in mean bonus pay between all male and female employees who received a bonus, during the 12 months preceding 30 April
- The proportion of male and female employees who received bonus pay during the 12 months preceding 30 April
The definition of "bonus pay" in the Regulations includes:
- Payments received and earned in relation to profit sharing, productivity, performance and other bonus or incentive pay, piecework and commission
- Long-term incentive plans (including those dependant on company or personal performance)
- The cash equivalent value of shares on the date of payment
There are clearly some unanswered questions in relation to this definition and it is hoped that further clarification will be provided in the final version of the Regulations. For example, what does 'payments received and earned' mean? Will share values be reported as at the date of award or vesting? How will LTIPs and shares be valued, particularly those in private companies?
Tips for employers
- If you run a discretionary bonus scheme ensure that guidelines are issued to managers to assist them in making awards on a fair and non-discriminatory basis and introduce a level of validation to ensure those decisions are properly objective.
- Consider which groups of employees receive bonus awards; are such groups representative of both genders, would widening the pool reduce the gender award gap?
- Where possible run the relevant numbers now to establish whether or not your organisation is likely to have a significant pay gap between the genders.
- If you find you have a large bonus pay gap, review the design of your scheme to see if changes can be made for future years.