BACKGROUND

The Government has published draft regulations to introduce mandatory gender pay gap reporting. Employers will have to publish information showing whether there are differences in the pay of their male and female employees. The Government intends to bring the legislation into effect on 1 October 2016. Employers will need to take a snapshot of their gender pay data in April 2017, and to publish their pay gap on their UK website by no later than April 2018, and annually thereafter.

WHO WILL HAVE TO REPORT?

The Government’s proposal is that employers employing 250 or more relevant “employees” as at 30 April 2017 (and each subsequent anniversary) will be required to publish their gender pay gap.

WHICH TYPES OF PAY HAVE TO BE TAKEN INTO ACCOUNT?

As drafted there is a significant lack of clarity around basic areas such as which “employees” will be covered by the regulations (will this include workers and contractors?) and also regarding the definition of pay. This will need further clarification. Certain types of pay are excluded e.g. overtime pay, which may lead to an inaccurate reflection of the gender pay gap, particularly if overtime is predominantly done by male employees in a particular business. There is confusion at present about whether commission or piecework is included and anomalies about reporting benefits in kind and salary sacrifice schemes.

In addition, pay is also determined as actual pay being received by individual employees at the date of calculation, which in the case of employees on sick or maternity leave could be low or even no pay, rather than their normal pay under the contract of employment. This means that having a number of employees absent on low or unpaid leave on the calculation date could have a significant impact on the overall figures and produce a distorted pay gap result. It is hoped that the next draft of the regulations will clear these issues up.

WHAT PAY DATA MUST BE PUBLISHED?

The draft regulations currently require employers to publish:

■ the percentage difference in mean pay between male and female employees;

■ the percentage difference in median pay between male and female employees;

■ the percentage difference in mean bonus pay during the 12 months preceding 30 April 2017 (and each anniversary thereafter); and

■ the proportion of male and female employees who received bonus pay during the 12 months preceding 30 April 2017 (and each anniversary thereafter).

Again there is a lack of clarity about the formulae for calculating the gross hourly rate of the relevant employees. The regulations currently require employers to publish the numbers of male and female employees in four separate quartiles. The provisions state that employers must identify the quartiles for the overall pay range based on the gross hourly rate of pay for each relevant male or female employee.

WHERE MUST THE GENDER PAY GAP DATA BE PUBLISHED?

The data must be published on the employer’s UK website in a manner accessible to all employees and the public. The information must remain on the website for at least three years. Employers must also upload the information to a Government designated website. The information must be accompanied by a written statement, signed by a director (for companies), which confirms that the information is accurate.

WHAT ARE THE SANCTIONS FOR NONCOMPLIANCE?

At present, there are no civil or criminal sanctions for employers who fail to comply and publish their gender pay gaps. However, the reputational risks of non-compliance mean that employers will need to comply, particularly as the Government has reported its intention to produce ‘league tables’ of employers’ pay gaps. Businesses who wish to be viewed as ‘employers of choice’ in competitive markets, are likely to view compliance as necessary to achieve that goal.

IMMEDIATE IMPACT FOR EMPLOYERS

The legislation is brief, raises many questions and is unlikely to lead to an inaccurate reflection of gender pay gaps. The regulations face significant redrafting to provide much needed clarification. However, it is quite possible that this will not be done until very shortly before they are due to come into effect.

Employers should not sit back, but there may be little point in doing a dry run now until the final detail is known. What is advisable is to review the processes by which pay and in particular bonus are determined to ensure transparency and to minimise potential for unequal pay.