In anticipation of new regulations requiring larger employers to publish pay gap information the government recently launched a consultation on this topic. The new regulations, which will apply to private sector employers with over 250 employees, must come into force by 26 March 2016, although the commencement of the obligation to publish under the regulations is likely to come into force some time after this date to give employers time to prepare.
Why publish your gender pay gap?
Publication is aimed at increasing pay transparency – particularly in the private sector where pay is individualised and secrecy is the norm. The current UK average figure for overall gender pay gap of 19% is higher than the European average of 16%. Many organisations are simply unaware of their gender pay gap or whether hot spots exist within their organisation. Research published by IFF Research in July 2015 highlighted that only 31% of employers had analysed their gender pay gap.
The consultation is asking employers for their views on:
- How the pay gap information should be displayed – and whether this should be displayed prominently on an organisation’s website
- The extent of the information provided - should this be a simple single figure which is beneficial for making comparisons, or should it be broken down in relation to grades or full time/ part time figures etc. which provides more detail
- Whether the regulations should encourage or require employers to publish a narrative to explain the context behind their pay gap information
- The frequency of publication and the required lead in time which will be necessary to prepare for implementation
- Enforcement - it is likely that employers who fail to publish this information will face fines of up to £5,000
The consultation ends on 6 September and CMS will be submitting a response. The consultation document can be found here. If you are interested in providing comments please contact us CMSEmployment.Team@cms-cmck.com.
Why do pay gaps exist?
Many factors influence the pay gap, such as horizontal occupational segregation where women cluster in certain types of role like education and nursing, but are less prevalent in areas such as technology and engineering. Vertical occupational segregation is another factor where women are well represented at entry level but fail to maintain this representation at senior levels.
This clustering in lower levels or in particular roles is linked to stereotyping of male and female roles affecting aspirations of young girls as well as what is known as “the motherhood penalty”, where working mothers incur disadvantages in addition to those relating to their gender. It is not a coincidence that the ONS pay gap information for employees between the ages of 18-39 is considerably lower than the pay gap information for the age 40 and over categories.
Will a high figure result in equal pay claims?
Gender pay information which indicates an issue with gender pay equality in an organisation may prompt an individual to look at their own personal circumstances, and bring an equal pay claim. Of course there can be a link, but an equal pay claim has very specific and difficult legal tests to satisfy which are based on finding a comparator and establishing that a woman is paid less than a man where they are carrying out like work, work of equal value or work rated as equivalent.
What can employers do to tackle gender pay gap issues?
As the consultation document envisages, publication is not an end in itself, and crucially it is what an employer does with the pay gap information that will make a difference. There are also steps that an employer can take now to prepare for the regulations coming into force.
Employers who have never analysed their gender pay gap should do so now. If there are obvious areas where a pay gap discrepancy exceeds the norm then employers may wish to consider taking action before publication. It is also worth finding out the context for your own industry as the figure can vary considerably. The Scottish legal profession’s figure sits at 42% with financial and insurance sectors sitting below this at 35%.
General assistance can also be found in the guidance accompanying the Think, Act, Report initiative and the Government’s Equal Pay Portal. More detailed analysis can also be obtained by conducting an equal pay audit which looks at roles and grading rather than simply being a numerical exercise.