On 6 April 2017, the Equality Act 2010 (Gender Pay Gap Information) Regulations came into force, requiring employers with at least 250 workers to report their gender pay gap. This update consolidates our previous bulletins on gender pay reporting for private sector employers, taking into account the final version of the regulations and the government guidance.
Which employers have to report gender pay gap information?
Although the gender pay rules only apply to employers which on 5 April in any year have a headcount of 250 or more employees, the guidance encourages employers with fewer employees to carefully consider the business benefits of complying with the gender pay rules.
'Headcount' of 250 or more employees
- The definition of employees - for assessing whether an employer comes within the headcount - includes:
- workers (including workers on zero hours contracts, agency workers and other casual workers)
- some self-employed contractors (provided they are employed under a contract to perform work personally where they cannot subcontract the work or employ their staff to do it)
- overseas workers - if those employees have a sufficiently strong connection with Great Britain
- partners who are usually also considered as employees
The following individuals included in the headcount are excluded from the gender pay calculations:
- employees on reduced pay or (by reason of being on leave) no pay during the relevant pay period
- contractors - where the employer does not have the worker's data, and it isn't reasonably practicable to find
- partners of traditional partnerships and limited liability partnerships
Each employer within a group is treated as a separate entity for the purposes of gender pay reporting and each entity with at least 250 employees must publish a separate report on their gender pay gap. Although there is no obligation to report on any gender pay gap across the group, employers may consider giving an indication of the gap within the overall group for reputational reasons - particularly if other employers in the same sector are reporting on a group-wide basis. The guidance also suggests that larger employers may choose to break down further their calculations, particularly if they are operating in a number of different sectors, or where jobs and levels of pay and bonuses are not obviously comparable.
What pay information must be provided?
- Employers must report on:
- mean and median hourly pay rates
- mean and median bonus pay
- the proportion of men and women who are paid a bonus
- quartile pay bands. These bands are calculated by dividing the workforce into 4 equal sized groups. Employers must arrange the pay data in order, from the lowest paid worker to the highest, and divide the total number of workers into four bands, so each band contains 25% of the total workers
Pay does not include, for example, overtime, statutory sick pay or statutory maternity pay. 'Pay' only includes paid leave (including annual leave, sick leave, maternity and other family leave pay) if the employee is paid at their usual rate of pay. Employee pension contributions to a pension scheme which are made by salary sacrifice should not be included in the pay figures - so the salary after the salary sacrifice should be used in the calculations. Bonus pay is included in pay only if it is paid in the relevant pay period (effectively the 'snapshot period' – see below) but it is pro-rated.
The data 'snapshot' date is 5 April 2017, and annually thereafter. Pay is measured in respect of a 'snapshot period' - the period in which the employer pays the employee basic pay. So, for employers who pay their employees on a monthly basis, this is the month in which the snapshot date falls, but it could be weekly, fortnightly, or any other relevant period.
Bonus pay includes securities, securities options and interests in securities. In addition, long service awards with a monetary value (e.g. cash, vouchers or securities) are treated as bonus pay; and 'one off' incentive payments for recruitment and retention are bonus pay (not pay). Only bonuses which are paid to employees during the relevant pay period in which the snapshot date falls must be included; those awarded but not paid out in the relevant pay period are excluded. Where securities provided to employees do not give rise to an income tax charge at all (e.g. as part of a share incentive plan where shares are kept for a certain period of time) they will not be included in bonus pay.
If the calculations produce a positive percentage figure this shows that overall, female employees have lower pay or bonuses than male employees.
Although there is no requirement to include a narrative alongside the gender pay figures, consider providing more information to explain your gender pay gaps and to demonstrate what you are doing to close the gap. This is your opportunity to publicise your diversity programmes – or, if you don't have any, start some now. Whilst most employers will have a pay gap at present, employers who do not implement measures to close the gap will likely come under the closest scrutiny and be subject to intense media and public pressure.
How should the gender pay gap information be reported?
All reports must contain a statement confirming that the information is accurate and must be signed by a Director (or equivalent).
The deadline for publishing the information is 4 April 2018 (and annually thereafter). Employers must publish a gender pay report on their searchable UK website (in a manner that is accessible to all employees and the public) and on a dedicated government sponsored website. The Government has now set up a 'beta' version of this website, and a few employers have already posted their gender pay gap figures.
How will the rules be enforced?
Whilst the Regulations do not contain any sanctions for non-compliance, the Equality and Human Rights Commission will have power to take enforcement action against an organisation which fails to comply with the Regulations. By requiring that the information is published, however, the Government is also using the 'naming and shaming' approach to drive change through public pressure. The risk of negative publicity and of losing valuable female talent to competitors is likely to be more effective than nominal financial penalties.
What are the next steps for employers?
Between now and 4 April 2018, publish your gender pay information at an appropriate point in time. You may also wish to have regard to the timing of this relative to the second publication of your pay gap based on data at 5 April 2018.
Consider to what extent you will inform your employees about your gender pay data, and ensure your HR and management teams are ready to answer questions employees have about the pay gap. When providing this information to employees, beware of breaching data protection rules and creating evidence for claims.