The Government has committed to introducing new regulations requiring larger employers in the private and voluntary sectors to publish details of their gender pay gap ie the difference in pay between male and female employees. Today, the Government Equalities Office has launched a consultation seeking the views of employers and others on the detail of the requirements, including precisely what will need to be reported, where, how frequently and from when. Whilst the Government has pledged commitment to this step, it is interesting to note that the very first question of the consultation asks respondents if they agree it will help close the pay gap. The consultation closes on 6 September 2015.
Who will be affected?
The new regime will only apply to organisations in Great Britain with at least 250 employees. One of the questions being asked in the consultation is whether the 250-employee threshold is appropriate and we may yet find, when the regulations are published, that the threshold is raised so as to confine the new duties to larger organisations, at least in the early years.
The new reporting requirements will not apply to most public authorities (ie those listed in schedule 19 of the Equality Act), who are required to comply with the public sector equality duty and, therefore, already have broader equality obligations than most other employers.
When will the new rules take effect?
Although the Government aims to have the new regulations in place by March next year, they will not take effect immediately. Employers will be given some time to prepare for implementation, although it remains to be seen precisely how long that lead-in period will be. One option being considered is a phased commencement – requiring larger employers (ie those with at least 500 employees) to publish the required information before smaller employers.
What will have be reported?
It is not yet clear what information employers will have to report when the new regime takes effect. The Government appears to be considering the following options:
- Reporting one overall gender pay gap figure that captures the difference between the average earnings of men and women across the organisation as a percentage of men’s earnings.
- Reporting separate gender pay gap figures for full-time and part-time employees.
- Showing the difference in average earnings of men and women by grade or job type.
As part of its consultation, the Government is asking which of the above measures employers would be able to calculate from existing data and systems. Given that the third option under consideration is likely to be problematic for some employers, it seems most likely that the Government will plump for one of the first two options. Although this would make the task of gathering the data needed to comply with the regulations less onerous, raw figures like this are rarely informative and, at their worst, can be misleading. Many employers will be concerned that highlighting pay differences in this way could leave them exposed to equal pay claims or could damage their reputation for fair treatment. Many will, therefore, want to provide additional information, including a contextual explanation, to give a more nuanced and accurate picture, even if not required by the legislation. The Government is seeking views on whether there should be any official guidelines (whether in legislation or non-statutory guidance) as to what that additional information should contain.
Where will the information have to be published?
The consultation paper reveals very little as to the likely rules on where employers will have to publish information about their gender pay gap. The consultation paper simply asks whether the regulations should specify precisely where the information must be published, such as in a prominent place on the employer’s website. At the moment the Government does not seem to suggest that such information should be included in Annual Reports.
How frequently will employers have to report?
The Government is also asking how frequently employers should have to publish their gender pay gap data. At most, employers will have to provide the information annually. It is likely, however, that the regulations will require less frequent publication, say every two or three years.
It appears likely that the Equality and Human Rights Commission will be tasked with monitoring compliance. A failure to comply with the rules could, ultimately, be treated as an offence, attracting a fine for the defaulter. Prosecutions are likely to be very rare, however, and fines are unlikely to exceed £5000.
The real incentive to comply with the new rules will come from the risk of adverse publicity and reputational damage (which could impact on the ability to recruit and retain staff): defaulters are likely to be easy to identify and unions, campaigners and the media could well be keen to name and shame those who try to keep their gender pay record under wraps, particularly in the case of well-known brands and those competing for work in the public sector. Defaulters may also attract attention from no-win no-fee lawyers seeking to generate equal pay claims.
What to do now
Many employers will be keen to get their houses in order before being exposed to public scrutiny. If you are one of those employers, here are some practical suggestions to help you prepare:
- Be proactive – doing nothing is not an option. Understanding your pay arrangements will help you manage and present information meaningfully and in context.
- Review all current pay practices across your organisation in order to understand the differentials which may exist.
- Consider gender pay gaps which exist on a departmental/geographical/functional level and compare these with the composition of your workforce.
- Analyse the rationale behind your current arrangements to identify potential risk areas.
Link to consultation paper: https://www.gov.uk/government/consultations/closing-the-gender-pay-gap