Today the government published its draft regulations on gender pay gap reporting which, if approved by Parliament, will come into force on 1 October 2016. Below we summarise the regulations and focus on what employers will need to do to comply.
Which employers are affected?
The regulations will apply to employers with 250 or more employees. An "employee" for these purposes means someone who ordinarily works in Great Britain, and whose employment contract is governed by UK law.
What are employers' obligations?
Employers will be required to publish a comprehensive set of data which shows the extent of the gender pay gap in the organisation:
- The difference in mean pay between male and female employees
- The difference in median pay between male and female employees
- The difference in mean bonus between male and female employees who receive bonuses
- The proportion of male and female employees who receive bonuses
- The number of men and women in each quartile of the employer's pay distribution.
Employers will need to calculate these figures using the hourly rate of pay for each employee. This is to ensure that averages are not affected by the number of hours worked. The reference period used to calculate the hourly rate will be the employees' pay period within which 30 April falls, which will usually be one week or one month (depending on when employees are paid).
This publication must be annual and must be accessible to employees and to the public on the employer's website, and remain there for three years. It must also be sent to the government.
As yet, there are no proposed civil or criminal sanctions for failing to comply with the regulations. However, the government intends to monitor which employers comply, and may well name and shame those failing to do so.
What steps should employers take now?
If the regulations are approved, they will come into force on 1 October 2016. The first pay period for which data must be collected will be April 2017 and the first set of data must be published within 12 months of this date. We advise employers to start preparing now for the impact of the regulations.
The effect of the regulations is likely to be twofold: firstly, employers will have to face the administrative burden of collecting, analysing and publishing the data; and secondly, addressing the potential reputational damage (and damage to employee relations) that could be caused by revealing a gender pay gap.
In terms of administration, employers should consider how well placed they are to collect and process the relevant data. The availability of the raw data (i.e. the hourly rate of pay for each employee) will be crucial. Employers will also need to be familiar with handling this raw data to create quartiles and the three different sets of averages listed above, although many HR teams will already be very familiar with this sort of statistical analysis.
Employers should also consider the damaging effect which the revelation that a gender pay gap exists could have on their reputation, and to employee morale and retention within the affected group(s). To counter this, employers may wish to review their equality and diversity policy and practices, and their salary review procedures, with a view to reducing any gender pay gap that is identified. Employers may also wish to make use of the opportunity to publish a voluntary narrative alongside the data to explain any pay gap and what positive actions are being taken to address it.
The government has issued a consultation on the draft regulations and the deadline for responses is 11 March 2016. The consultation and draft regulations can be found here.