The countdown for new legislation in Ireland requiring large companies to report on differences in pay between men and women has begun, with many Irish employers required to prepare and submit gender pay gap reports in December.
Initially applying to companies with more than 250 employees, employers will be required to report not only whether there is a gender pay gap in their organisation, but why there is one, and what they intend to do about it. In this respect, it goes further than the UK legislation on which it is modelled.
To date, much of the focus has been on the challenges that employers will face in collating and reporting on this data by December. This is understandable given the relatively short lead time, but it has meant that not enough attention is being given to a critical aspect of the legislation – namely, the additional requirement to explain the reasons for any gender pay gaps, and the measures that are being taken to eliminate them.
What needs to be reported?
Employers will need to publish information about:
- the mean and median gap in hourly pay between male and female employees;
- the mean and median gap in hourly pay of part-time male and female employees;
- the mean and median gap in hourly pay between male and female employees on temporary contracts;
- the mean and median gap in bonus pay between male and female employees;
- the percentage of male and female employees who received bonus pay;
- the percentage of male and female employees who received benefits in kind; and
- the percentage of male and female employees in each quartile pay band.
The mean gap identifies the entire pay range in an organisation, while the median gap is meant to illustrate any pay gap in a manner that is less skewed by unusually high earners. Employers must choose a “snapshot date” in June 2022, which will establish the data set for its December 2022 report, and which will then be used for year-on-year comparison purposes into the future.
Regulations published by the Government in June provide further explanation on how to calculate the gender pay gap, including how to calculate an employee’s hourly remuneration, bonus remuneration and total working hours. The Government has also published a general guidance note (the “Guidance”) and an FAQ for employers on gender pay gap reporting.
Critically, the legislation also imposes a positive obligation on the part of employers to publish reasons for any differences and measures being taken (or proposed to be taken) to eliminate or reduce those differences. In this respect, the legislation varies from the UK equivalent, which does not impose any requirement beyond reporting the existence of a gender pay gap.
How should employers publish this data?
Employers are required to publish the information annually on their website and ensure that the information is accessible to their employees and also the general public. Where an employer does not have a website, the information must be made available for inspection by employees and the public at the employer’s registered office or principal place of business, during normal business hours.
The information needs to be accessible for three years from the date that the data is published. It is envisaged that there will be an online reporting system for the 2023 reporting cycle, where reports will be uploaded and accessed publicly.
What are the risks of not complying?
The legislation empowers the Irish Human Rights and Equality Commission to apply to court for an order compelling compliance, in circumstances where it reasonably believes an employer has failed to comply with the Regulations. A failure to comply with such an order would be a contempt of court.
Employees will also be able to make a complaint to the Workplace Relations Commission which, if it upholds the complaint after an investigation, can order the employer to take action to comply with the Regulations.
On that basis, the focus seems to be on ensuring compliance, as opposed to punishing non-compliance. There is currently no mechanism for financial penalties to be awarded against an employer who does not comply, nor is there any power on the part of any body to legally require that an employer follows through on any stated proposals to eliminate the pay gap in their organisation.
What are the practical ramifications of disclosing a large pay gap?
Unless equal pay provisions are breached, there are no legal ramifications for employers who disclose a large gender pay gap – a fine will not be levied, nor will any other penalties be imposed. The principal ramification is reputational and, ultimately (but indirectly), financial.
In the UK, it is already having a bearing in procurement processes, with many organisations proactively disclosing gender pay and diversity data, even when not legally required. The potential reputational impact of getting this wrong was highlighted on International Women’s Day this year, when a UK twitter account went viral by highlighting the disparity between the self-congratulatory tweets of companies celebrating their female employees, and the amount that those employees were paid relative to their male colleagues.
The reality is that employers will be held to account.
If the data is not positive, how should an employer respond?
Rather than seek to hide behind it or deny its existence, employers should treat the data as what it is – a snapshot in time, the seeds of which have likely been sown years before. A gender pay gap that arises now is a function of a multitude of different actions and decisions that have led up to this point – both individual and societal.
Gender pay data does not include the data of female employees who have left an organisation, perhaps because of lack of opportunities for advancement, or its incompatibility with other aspects of their life such as family commitments. Similarly, it doesn’t capture the data of employees who never joined that organisation in the first place, whether due to gendered expectations as to what is a “man’s job”, bias at hiring, or a workplace culture that feels unwelcoming or even hostile.
What it does capture is the outcome of these actions and decisions. The lack of female representation at senior levels in an organisation. The higher proportion of leavers. The disproportionate number in part-time, “family-friendly”, roles. These are all reflected in gender pay gap data. However, these are also the levers that can be applied by employers to bring about meaningful change.
By seeking to address some or all of these issues, employers can make tangible progress. It will not be easy – there is no silver bullet. For example, a greater sharing of childcare responsibilities is often presented as a potential solution, with Nordic countries put forward as aspirational examples. However, the average gender pay gap in those countries is actually higher than in Ireland, largely due to a gender-segregated workforce in which male employees are overrepresented in more lucrative professions.
How can an employer use its data to create a more equitable workplace?
While it is a complex and muti-faceted issue, Irish employers can at least learn from other jurisdictions that are further down this road – for example, helpful, evidence-based advice can be found in a recent UK Government Equalities Office report on reducing the gender pay gap. The key is to try and identify the particular levers that are most appropriate to a given organisation, and then to apply them in practice.
By requiring employers to disclose why there is a gender pay gap, and what they intend to do about it, the new legislation ensures that this is a question that cannot be ignored. It will become clear over time which companies are serious about taking steps to address any existing pay gaps, and those that are not.
Though it may be a difficult question to answer, this is an issue that employers cannot afford to ignore. Employers need to start not just thinking about how to collate the information, but also how they are going to explain it if they come up short, and how they will change this going forward.