These FAQs look at the issues of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations) and some common queries that the Regulations give rise to, for independent schools.
The final version of the draft Regulations were published on 6 December 2016 and they are due to come into force on 6 April 2017. It is unlikely that there will be any further changes before they come into effect.
ACAS has also now released some helpful guidance which sheds some further light on the requirements, although it still leaves some unresolved questions for schools.
We offer a wide range of support to assist schools in meeting their obligations and understanding and managing any risks associated with the Regulations.
Which organisations do the Regulations apply to?
The Regulations apply to private sector employers (including charities and independent schools) with 250 or more employees.
The Government has also now confirmed that it will introduce similar reporting requirements to cover public sector organisations as part of them discharging the public sector equality duty.
Do casual members of staff count as 'employees'?
The definition of 'employees' is broad and so will include casual staff if a contract is in place with them on 5 April in each year.
This will include most casual staff, including those on zero hours contracts, and those who have 'umbrella' agreements with schools to undertake work as and when required. This will usually include employed peripatetic staff and exam invigilators.
It will also cover any other member of staff who has an agreement to personally work for the period which includes 5 April, even if there is no ongoing contractual arrangement.
Where the inclusion or exclusion of 'casual staff' is likely to prove critical schools may want to conduct a closer analysis of working arrangements, in order to assess the options available.
Do self-employed staff count?
Individuals who are genuinely self-employed fall outside of the scope of the Regulations. However, the updated draft Regulations confirm that 'workers' (i.e. individuals who are not strictly employees but who are engaged under a contract to personally perform services for the school) will count and should be included in the pay analysis exercise. Schools should be particularly cautious where they have categories of individuals that are treated as self-employed but from a legal perspective should arguably be categorised as employees or workers. This is likely to be most relevant where the exclusion of these staff means that a school falls below the 250 threshold which may mean this is subject to scrutiny.
Contracted out staff who are provided through cleaning, catering or IT companies (or similar) should be excluded. Agency workers are also excluded. Schools should be aware of the potential impact if they are deciding to take cleaning or catering in-house and may wish to consider the timing of any such projects.
When is it necessary to produce the first report?
The first report will be based on pay data captured on 5 April 2017. The first report can then be published at any time from 6 April 2017 to 4 April 2018.
It will then be necessary to publish reports annually thereafter:
- for the pay reference period April 2018 no later than 4 April 2019
- for the pay reference period April 2019 no later than 4 April 2020 etc.
What pay gap information needs to be reported on?
There are six reports that are required under the Regulations:
- The difference in mean pay between genders (expressed as a %)
- The difference in median pay between genders (expressed as a %)
- The difference in mean bonus payments between genders (expressed as a %)
- The difference in median bonus payments between genders (expressed as a %)
- The proportion of men and women in the workforce that received a bonus
- The number of men and women in each quartile of the pay range
We would recommend that schools accompany the key reports with a narrative and also consider publishing further information if it would add helpful context.
What is a pay quartile?
The final draft Regulations have helpfully clarified what a pay quartile is and how to calculate pay quartile bands. Schools will be required to rank employees in order of their pay from lowest to highest, then divide the workforce into 4 equal groups based on their hourly pay rate and show the proportion of genders in each group. This will show the gender profile across an organisation, and critically will not be affected by a few high earners.
Schools will also be relieved to know that there is no requirement to publish to pay rates within each 'quartile', so this report will not disclose senior management pay.
How do you undertake the calculations which underpin the reports?
The reports on mean pay difference, median pay difference and the pay quartiles are all based on establishing the 'hourly rate of pay' for each relevant full pay employee.
What is the hourly rate of pay?
The hourly rate of pay is determined by following a prescribed process that is set out in the Regulations. In summary, it requires the steps set out below. Please note that additional steps will be required if bonuses are paid.
- Identify all amounts of ordinary pay paid to the employee during the relevant pay period. The Regulations specify which elements of an individual's pay should be taken into account and which should be excluded.
- For weekly paid workers, this is the gross pay (as defined) that they received in the week including 5 April.
- For monthly paid workers, this is the gross pay (as defined) that they received in the month including 5 April.
- For monthly paid workers then multiply this pay amount by the 'appropriate multiplier' to convert it into a 'week's pay' figure. This requires the month's pay figure at step 1 to be multiplied by 7 and then divided by 30.44 (the prescribed number of days in a month).
- Divide by the number of 'weekly working hours'.
How do we determine an employee's weekly hours?
There are three different ways depending on the type of worker and their contractual terms:
1. For staff with normal working hours - this is the number of hours specified in their contract of employment
2. For staff whose hours vary from week to week:
- Either - an average over the 12 week period (ignoring any weeks that they did not work at all)
- Or - if there is a reason that calculation cannot reasonably be made, then a fair estimate of hours worked in a week.
Can we use an established hourly rate of pay as an alternative to the calculation?
Yes - in certain circumstances. The ACAS guidance does provide that if an employee's hourly pay is already available then this can be used without carrying out the calculation, if their normal working hours differ from week to week, they have not received any bonuses in the relevant period, and, they do not have a higher rate of pay used in some circumstances (e.g. for weekend or bank holiday work, although note it would not matter if they have a higher rate used for overtime only).
How should we approach teachers' hours if these are not stated in their contract?
We would suggest that a sensible approach is for schools to use a number that fairly represents teachers' contractual working hours. This should be based on their teaching, prep-time and any additional extra-curricular or pastoral duties.
The rationale for this approach is either that they can be deemed to have normal working hours (category 1 above), and so the figure represents their contractual hours (albeit these are not written down), or that their hours are irregular and it is not reasonable to record and carry out an average for all staff (category 2b above).
How do the calculations work for term time only staff on annualised hour arrangements?
The Regulations do not specifically address this.
The Regulations focus on an employee's working hours based on the method of calculation as stated at Q8 above. There is no scope to use an annualised average. Schools may find that their term time only calculations create an artificially low gross hourly rate figure for term time only workers where their pay in the month has been annualised and so also accounts for non-working weeks. In order to explain their pay data, schools may also wish to explain this in the narrative and/or run a separate calculation based on the employee's average annualised hours (using the working hours multiplied by term time weeks and then dividing by 12) and to publish this data alongside explanatory commentary.
My school is a boarding school. How do I calculate weekly hours for residential staff?
Working hours include hours where the employee is on-call, and/or required to be available and awake at or close to the place of work. Time spent off duty and at home (even if 'home' is on the school site), and time spent sleeping should not be included.
What if staff are on maternity leave or off sick?
If they are in receipt of full pay then they should be included in the usual way. If they are on a rate of maternity pay or sick pay which is lower than full pay, then they can be discounted entirely from the reporting calculations.
What happens if we operate a salary sacrifice arrangement?
In accordance with the Regulations, the value of salary sacrifice arrangements are excluded from the definition of 'pay'. This means that the 'pay' figure should be taken after the deduction has been made for the salary sacrifice scheme.
This may create an artificially low 'hourly rate' for schools that operate salary sacrifice schemes (particularly where a significant sacrifice is made, such as for school fees). Although this was raised in the consultation the response is to continue to calculate pay on this basis (in part due to the practicality of pulling the figure from the payroll). Schools may wish to explain any distortion in the narrative and/or calculate the figures both pre and post salary sacrifice.
What should our School be doing to prepare for the Regulations?
We would recommend that in the first instance you ensure that you understand your own data and satisfy yourself that it is accurate and can be relied upon.
Understand the information you will need to run the reports and consider the most effective way of capturing this, perhaps in discussion with your payroll provider.
It is worthwhile doing a trial run (perhaps with the benefit of legal privilege) to ascertain the gender pay gap and so you have advance warning of what the gender pay reports will look like.
Analyse whether the reports create any legal, organisational or reputational risks, and consider a strategy to address these.
Take steps to ascertain the cause of any pay gap so that this can be explained in the narrative or so you can consider the options to close the gap (if appropriate to do so).
For all organisations it is helpful to have a transparent and robust pay policy so that everyone within the organisation understands how pay decisions are made.