The Government has now published draft regulations providing for mandatory gender pay reporting and has invited employers and others to comment on what, if any, modifications should be made to the draft regulations by 11 March 2016.
There has been some confusion amongst employers as to when the new reporting obligations will apply, with early reports suggesting that it would be introduced in Spring 2016. However, the Government has now confirmed that the regulations will not come into force until 1 October 2016 and employers will, effectively, be given an 18 month 'lead-in' time to publish their first gender pay gap statement. Employers will need to take steps now though to ensure that they have the necessary systems and processes in place to capture the data efficiently, as they will be required to report on a data snapshot taken in April 2017, by April 2018 and thereafter on a yearly basis.
The regulations will apply to employers with at least 250 employees, who ordinarily work in Great Britain and whose contract is governed by UK legislation. If you employ fewer than 250 (as at 30 April 2017) then you will not be required to publish any data in April 2018. However, if your workforce exceeds 250 employees on the subsequent anniversaries of that date, you will be caught by the regulations and will be required to publish the relevant data in future years.
Those caught by the regulations will be required to publish the following information:
- the overall 'mean' and 'median' gender pay gaps;
- the difference between the 'mean' bonus payments paid to men and women;
- the proportion of men and women who received bonus pay; and
- the number of men and women in each quartile of the pay distribution.
As flagged in my earlier blog on gender pay gap reporting, particular focus has been given to bonus pay (which must be included in the overall figures and also reported separately). The Government has stopped short of requiring employers to provide a detailed breakdown by grade or job type, or produce separate data for full and part-time employees. However, the overall 'mean' and 'median' figures will need to be calculated on an employee's "gross hourly rate of pay".
The definition of "pay" may also cause some employers an administrative headache. Pay includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus and other pay, including car allowances paid through payroll, on call and standby allowances, clothing, first aider or fire warden allowances. It does NOT include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits, which will need to be excluded from your calculations and any analysis.
And you will need to be confident about the accuracy of the data you gather – as a director (or equivalent) will need to sign-off on its accuracy - and the data (including the director's statement) will need to be published on your website and retained there for at least 3 years. You will also need to link the published data to a government-sponsored website, and the Government has said that it intends to build up a database of complying employers, with examples of compliance and non-compliance identified.
Supporting guidance is to be published later in the year by the Government to help employers implement the regulations. This guidance, amongst other things, will provide advice on providing voluntary narrative that explains any pay gaps and what actions the employer is taking to address them. While employers will not be obliged to contextualise their data with a narrative, we would strongly advise that a narrative is given where gaps are identified, for example to give detail around the initiatives you may have implemented to recruit more women or strengthen your female talent pipeline and to mitigate the risk of reputational damage from publication of a significant gender pay gap, and we can help with any narratives you provide along with the data.
While the Government has afforded employers an 18 month "lead-in" time, it is clear that this new obligation will require considerable planning, first in putting in place systems and processes which will allow you to take the first snapshot in April 2017, and then in how that data is presented. Care also needs to be taken to ensure that you do not inadvertently create documents during the planning stage that could be used against you in any subsequent equal pay proceedings. If you would like to discuss your obligations further, and in particular how you might go about collating the data in a way that does not expose you to additional risk, please do speak to me or your regular contact in the team.