The draft Gender Pay Gap Information Regulations were published on 12 February 2016. Consultation closed on 11 March 2016. Final regulations were due to be published in July 2016 and laid before parliament in the Autumn but they have been delayed by the Brexit vote. The final regulations are expected very soon and it is not expected that the timescale for reporting will change. The summary below is based on the draft regulations published in February 2016 updated with the latest information received from the GEO.
To whom will the regulations apply?
The regulations will apply to private sector employers that have 250 or more employees on 5 April 2017. On the face of the draft regulations, smaller companies will not have to report their data even if they are part of a group which has more than 250 employees in total. ACAS is preparing non-statutory guidance which, it is hoped, will explain how groups of companies should report.
These regulations will not apply to the public sector but the government undertook a consultation (which closed on 30 September 2016) on whether to impose similar requirements on the public sector.
The draft regulations only cover employees. The GEO has subsequently confirmed that the final regulations will adopt the wider definition of employee used in the Equality Act 2010. It also includes those employed under a contract personally to do work.
When will they come into force?
The final regulations were due to come into force on 1 October 2016 but this has been delayed. Pay data will still have to be collected as at the revised date of 5 April 2017 but employers will then have a further 12 months to publish the data. Data will then have to be published annually. Bonus pay data will be required for the period April 2016 – April 2017.
What will have to be published?
The government has decided against significant details in terms of what must be reported, and employers will not have to publish the detail of pay by grade or job description. They will have to publish:
- mean difference in pay between men and women as a percentage
- median difference in pay between men and women as a percentage
- the number of men and women in each quartile of their pay distribution – with the objective of highlighting any blockages to the progression of women
- the mean (and potentially median) difference in bonus between men and women shown as a percentage
- the proportion of male and female employees who receive a bonus as a percentage.
The median figure will highlight whether the mean figure has been distorted by very high or low paid outliers. Bonus payments are to be shown separately because research undertaken by the Equality and Human Rights Commission in the financial services sector has shown that bonus is a significant contributing factor to the gender pay gap, with women generally receiving substantially lower bonuses than men. The draft regulations do not require the median difference in bonus to be published but the more recent consultation on gender pay reporting in the public sector indicates that the proposal is for the public sector to publish both median and mean. Since the two sets of regulations are intended to mirror each other it is likely the finalised private sector regulations will also require both mean and median bonus data to be published.
The GEO has also clarified how pay quartiles are to be calculated. The workforce is to be divided into four equal groups and the employer reports on the proportion of men and women in each quartile.
What counts as pay?
It is the gross hourly rate of pay determined by dividing weekly pay by weekly basic hours in the relevant payment period which is to be compared. The relevant payment period will be the period that includes 5 April. The period will depend, for example, on whether employees are paid monthly or weekly. This means the published data will provide a snapshot of the relevant details. There does not appear to be any mechanism in the regulations for averaging out the gross rate of pay where the employee works variable hours.
The approach reflects that used by the Office of National Statistics in its annual labour force survey. This is to facilitate cross-sector comparisons.
However, what is included and excluded in pay for reporting purposes may significantly affect the gender pay gap shown by the data. Key points are as follows:
- Overtime is not included. According to the government this is to avoid creating a perverse incentive for employers to force women, who generally undertake less overtime than men, to undertake overtime.
- Benefits in kind, such as a company car, more usually associated with senior managerial roles, are not included but allowances, which may include a car allowance, will be.
- Salary sacrifice, including pension schemes, does not count towards pay. On the other hand, pay is to be calculated before deductions to pension schemes. That means that the way the payment is made into the pension scheme may affect whether it counts as pay.
- Maternity pay and other paid leave is to be included but only if an employee is paid their normal pay whilst on leave.
- Only bonus which is earned and received will be included in the reported data. Presumably, if a bonus is sacrificed into a pension scheme before it is received, it will not have to be included.
The GEO is also considering whether employment related securities should only be included if they are taxable as income. That would mean that the grant of options (being taxable as a chargeable gain) would not be included.