The Government has this week published the final draft of the Gender Pay Gap Information Regulations for the private sector. These were originally expected to come into force on 1 October 2016, and a first draft was put out for consultation in the Spring of this year.
The Government has made some quite substantial amendments to the first draft and has therefore delayed implementation, which will now happen on 6 April 2017. Similar regulations for the public sector will follow later.
The underlying aim of these regulations, to require more transparency in matters of equal pay in large organisations, is to be welcomed, as it will provide a broad overview of the pay gap in many organisations. However, many of the concerns that were originally expressed about the regulations remain unresolved by the final draft, as is discussed below.
The regulations require large private sector employers to publish the differences in pay rates between male and female employees. Employers will be required to provide information on both the mean and the median differences, as well as differences in mean and median bonuses.
They will also need to prepare a list of all employees from lowest paid to highest paid, and split it into four groups with equal numbers of employees in each, so that they can then publish information about the proportions of male and female employees in each of the four bands.
Probably the most significant problem with the regulations as drafted concerns the sanction for non-compliance. Although the Equality Act, which was the original legislation providing for equal pay audits and was the basis of the draft regulations that we now have, stipulated that sanctions could include a fine and summary conviction, these haven’t ultimately been included in the regulations.
It would have also been helpful if employment tribunals and courts had been given express powers to draw adverse inferences of a non-complying employer in an equal pay case. Instead, the explanatory note to the regulations suggests that the EHRC can take enforcement action in the event of non-compliance. Given the numerous cuts to the EHRC’s budget (their budget was reported to be £62m in 2010, and is anticipated to drop to £17.4m by 2020), it is questionable how effective this sanction will be.
The Government has indicated that it may name and shame non-complying employers, but this may not have much of an impact in practice.
Another concern is how useful a tool these regulations will be for female employees who suspect that they are being paid less than their comparable male counterparts.
The requirement mentioned above to provide proportions of male and female employees in each of four pay bands doesn’t extend to requiring a breakdown of the grades within each pay band. This may make it difficult for women employees to actively drill down into the detail and so they may still not be equipped with sufficient, concrete information about the differences in pay to enable them to feel confident about raising the issue or pursuing a claim.
Other concerns include the fact that overtime is not included in the calculation of the hourly rate, despite the fact that it would be consistent with the Equality Act and other employment legislation to do so. Given that there is often a gender imbalance in relation to overtime itself, as women are less likely to do overtime because of caring responsibilities, it really does seem inappropriate for this to have been excluded from the calculation of hourly rate and therefore from consideration in pay gap reporting.
Finally, the regulations only apply to employers with 250 or more employees, which is about 0.1% of businesses in this country, so it’s questionable how much of a picture these regulations will in fact give of the pay gap landscape, and also how many employees will be able to benefit from them.
Overall then a welcome concept, but once you drill down into the detail concerns remain about just how useful and effective these regulations will be in practice.