The revised draft regulations differ significantly from the earlier draft. They are twice as long. The main changes are:

  • the snapshot date for pay reporting is 5 April, not 30 April as set out in the original draft regulations. This date change had been leaked, so is not a total surprise.

  • a new definition of pay including basic pay, allowances, piecework, and shift premium pay, as well as paid leave.

  • a new definition of bonus. In this new definition bonus payments which are subject to income tax, or would be but for a relevant exemption or relief, are targeted and the definitions of securities and options are the same as those in the income tax legislation. This is an amendment which this firm suggested to the Government.

  • a requirement to report on median bonus gap, as well as the mean bonus gap. This is a welcome inclusion as the median is a more realistic figure.

  • a revised approach to reporting on pay quartiles so that the relative proportions of males and females in each quartile pay band should be set out.

  • clarification that only those who are on full pay on the 5 April snapshot date should be included in the pay gap calculations and for quartile reporting purposes.

  • greater detail on how to calculate the hourly rate of pay, including for those employees who have no normal working hours.

  • a carve out that if it is not reasonably practicable for the employer to obtain the data it is not required to do so. This should be treated with some caution.

  • the obligation to ensure that the information is accurate, signed off by a Board Director (or the most senior employee), and published is unchanged.

Employers who operate bonus schemes will welcome the changes to the bonus reporting definition, as the original suggestion was unworkable.

While the new draft regulations contain more detail, some outstanding points still need to be clarified by the non-statutory guidance including whether reporting is at a group or legal entity level. This guidance will only be produced once the draft regulations have completed their way through Parliament, which is likely to be early in the New Year.

The revised regulations are not perfect, but they are better. Employers now need to make sure they are ready to do the snapshot work by 5 April 2017, and then deal with the fallout when this and any bonus gap is published. Ensuring good internal and external communication about why the gap exists will be vital in reducing any reputational damage, and legal risk that reporting on a gap brings.

We will be hosting an event in January which will cover the changes, the policy reasons behind them and explore some of the practical issues around reporting.