On 28 January 2017 Acas and the Government Equalities Office published draft guidance on the new gender pay gap reporting obligation, available here. Although in draft, we understand from the GEO that this is because it pre-dated the Parliamentary approval of the regulations and that no substantive changes are expected to the final version. We also understand that Parliament formally approved the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 on 30 January 2017, without amendment to the final form draft regulations, but these have not yet been published.
We will update our detailed briefing on the new reporting obligation once the final regulations and guidance are available.
The new requirements will apply to private sector employers with 250 or more employees from 6 April 2017. Employers will need to take their first snapshot of pay data on 5 April 2017, and publish it by 4 April 2018. The guidance explains the new reporting obligation as well as discussing the benefits and the possible means of taking action to address any pay gap revealed.
Detail of the new obligation
The guidance sets out in detail the types of data to be disclosed and how to calculate them, providing useful worked examples. It also clarifies some of the issues left unclear in the final form regulations, in particular which employers and workers are covered.
The guidance states that the regulations could cover both (i) employees sent abroad to work by employers based in Great Britain and (ii) multinational organisations that have employees working wholly or partly in Great Britain. In relation to the former, the guidance confirms that, as a general rule, an employee based overseas will be within the scope of the regulations if they can bring a claim to an Employment Tribunal under the Equality Act 2010. The guidance goes on to explain that: "this will depend on whether the employment relationship suggests a stronger connection to Great Britain and British employment law than to the law of any other country. Rules around international employment and jurisdiction are complex but indications that someone should be counted in the Gender Pay Reporting regulations include:
- having a contract subject to GB legislation;
- continuing to have their home in GB; and
- having the UK tax legislation apply to their employment.
Each case should be considered on its own facts and the employer will need to make a decision. Where there is uncertainty, they should consider seeking professional advice to help clarify their situation."
In relation to the type of worker covered, an issue again not expressly dealt with in the regulations, the guidance confirms that the extended Equality Act definition of employment will apply, namely
- employees, ie those with a contract of employment;
- workers with a contract to do work or provide services; (note that agency workers and those working through a personal service company will form part of the headcount of the agency or service company, not the end-user);
- self-employed people who have personally to perform the work.
The regulations provide that data for those employed under a contract personally to do work does not have to be included if the employer does not have, and it is not reasonably practicable for the employer to obtain, the data. The guidance notes that an employer may well have such data, for example where a project initiation document exists and/or a schedule of fees. It suggests that, where the employer does not hold the data, it should consider whether it is reasonably practicable to ask the relevant individual, and that new contracts should seek, where possible, to ensure that those employed under a contract personally to do work are required to provide the information needed for compliance. Employers should review their standard form contracts to ensure such a provision is included.
One issue not previously raised is the importance of sensitivity around gender assignment and the need to avoid singling out employees to be questioned about their gender. The guidance proposes that employees should be given an opportunity to confirm or update their gender record if appropriate and, where an employee does not self-identify as either gender, the employer may omit their data from the calculations.
The guidance states that "it will make sense to add gender pay reporting into a sensible point of their reporting cycle but employers should aim to publish their results as soon after April as is reasonable for them to do so". The suggested advantages in doing so are enhancement to brand and reputation, ease of locating data, avoidance of last minute problems and unanticipated issues, and ability to take early action to address pay gaps identified. However, there is no obligation to publish at any particular time provided the one year publication deadline is met and the guidance confirms that there is no obligation to publish at the same time each year.
A significant part of the guidance sets out good practice for employers, encouraging them to go beyond the statutory obligation to disclose data and to use it to help understand and address the underlying causes of their gender pay gap. It notes that contributory factors involving the workplace could include unsupportive and rigid corporate cultures, lack of well-paid part-time or flexible work, lack of progression to seniority, unconscious bias and discrimination. It also highlights the greater pay gap for women over 40. Employers are encouraged to include a supporting narrative with their published data, explaining why there is a gender pay gap and including a 'well-published written statement detailing an action plan' to address it, which should ideally be devised in consultation with unions and employees. Suggested benefits in minimising the gender pay gap include enhanced reputation, recruitment and productivity.
It is clear that, if employers wish to follow the advice to adopt a detailed action plan, they will need to carry out a much deeper dive into their pay data than is required to be disclosed under the regulations (which do not require breakdowns by working pattern or age, for example). The guidance sets out (at page 29) a list of types of data that comprise "effective gender monitoring" which employers "should" have in place as good employment practice. This evidence will then enable employers to take appropriate actions to reduce the gender pay gap, which the guidance suggests could include:
- ensuring related policies and practices are up to date
- training and supporting line managers
- managing family-friendly leave successfully (including encouraging male employees to take shared parental leave, and considering levelling pay for all types of family-friendly leave)
- making the most of flexible working, including at senior levels
- encouraging and reviewing career and talent development, for both genders
- minimising negative impact from pay systems
- considering positive action.