Regulations to introduce mandatory gender pay gap reporting for large private and voluntary sector employers came into force on 6 April 2017. This will hopefully prove to be a valuable tool for assessing levels of equality in the workplace and monitoring how effectively talent is being maximised.
The gender pay gap shows the difference between the average earnings of men and women. It varies by occupation, age group and working patterns. The causes, too, are varied, ranging from stereotypical representations of men and women to unsupportive and rigid corporate cultures in the workplace. The guidance states that while there are multiple actions available to an employer to tackle and reduce the gender pay gap, one of the most fundamental changes required in many cases is greater transparency.
The Advisory, Conciliation and Arbitration Service (Acas) and the Government Equalities Office (GEO) have published the final version of the non-statutory guidance which sets out who is required to publish annual information on their gender pay gap. It also clarifies a number of areas of uncertainty, in particular in relation to salaried partners and LLP members, casual workers and contractors, pension contributions and bonuses.
Under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172) (GPG Regulations), employers are obliged to analyse their pay and bonus information on a particular “snapshot date” in each reporting year. For all employers other than public authorities, this date is 5 April, and reports must be published within 12 months. For public authorities, the date is 31 March.
What does this mean for employers?
Large private employers and voluntary sector employers with 250 or more employees are required to publish annual reports which contain the following information:
• overall gender pay gap figures for relevant employees, calculated using average hourly pay; • the proportion of men and women in each of the four pay bands (to show how the gender pay gap differs across the organisation at different levels of seniority); • the proportion of male and female employees who received a bonus in the same 12-month period; and • the difference between men and women’s average bonus pay over a 12-month period.
Each legal entity with at least 250 employees within a group structure must report separately on its gender pay and gender bonus gaps. Larger employers may find it useful, but are not required, to break their calculations down further, for example, where they are operating in a number of significantly different employment sectors. Employers may also give an indication of the gender pay gap within their overall group. So long as employers provide the legally required calculations, they are able to enhance their reports by supplying additional voluntary information. The GPG Regulations stipulate that any additional information provided on a voluntary basis must be “informative and appropriate”.
The GPG Regulations state that partners (where they would usually also be considered employees) should be used to establish the employee headcount, but should not be used as part of the calculations. The reason for this exclusion is that partners in traditional partnerships and limited liability partnerships are not “paid”. Instead, they take a share of the profits, which is not directly comparable with employees’ pay. Therefore, firms and LLPs will not have to include the earnings of their partners or members in their gender pay gap or gender bonus gap calculations. This includes salaried partners and members.
Like partners, casual workers and contractors should be included in the headcount, but should be excluded from the gender pay gap calculations. This applies to employees who receive no pay at all during the relevant pay period.
An employee’s ordinary pay is calculated before deductions. Pension contributions are classed as a deduction, therefore the gender pay gap calculation will not be affected whether or not an employee makes pension contributions. However, if an employee contributes to a pension by means of a salary sacrifice scheme, the gross salary after the reduction should be used.
The GPG Regulations define bonuses as including anything that relates to profit sharing, productivity, performance, incentive and commission received in the form of cash, vouchers, securities, and interests in securities. Bonuses are included in the gender pay gap calculations if they have been received within the “relevant bonus period”. This is the preceding twelve months ending on the snapshot date.
Consequences for failure to report
The Equality and Human Rights Commission has the power to enforce any failure to comply with the GPG Regulations. Furthermore, employers may cause reputational damage if they do not publish the information, as suspicions behind the reasons why they have failed to submit the report may have a negative impact.