Summary: The Government has published revised draft Gender Pay Gap Reporting (GPGR) Regulations. These are intended to come into force in April 2017. The revised regulations clear up many issues raised during the consultation process on the first draft regulations. However, there remain some difficult grey areas. We hope these will be clarified by the guidance for employers that is expected out once the regulations have been approved by Parliament.

What you should do now

  • In preparation for the first snapshot date on 5th April 2017, your GPGR implementation team should consider doing a ‘dummy run’ pay gap analysis using the updated methodology set out in the revised draft regulations.
  • Identify significant pay gaps arising from that analysis and consider how to manage them. This will include deciding how to explain existing pay gaps in your report and more generally looking to see how to deal with material issues thrown up by your analysis before formally publishing your first pay gap report.
  • Update key stakeholders at the top of your organisation of these steps. This should include the senior executive who will be signing off on your GPGR report.

Key points to note from the revised draft regulations

Timeline

  • 5th April 2017: first pay data snapshot date.
  • 4th April 2018: longstop date to publish first gender pay gap statistics.

What you must publish

  1. The mean and median overall gender pay gap figures*
  2. The mean and median overall gender bonus gap figures
  3. The proportions of male and female employees who were paid bonus pay
  4. The proportions of male and female employees in pay quartiles*

(* employees on leave who are receiving reduced or nil pay (eg. those on unpaid maternity leave) can be excluded from this calculation)

What’s been clarified

  • Affected employers: the reporting requirement applies to individual employers within a group, not on a group-wide basis.
  • Affected staff: as expected, the reporting obligation will cover a far wider cross-section of your workforce. The regulations will now cover employees, workers, some self-employed contractors and apprentices. Partners and LLP members are expressly excluded. Agency workers supplied through an agency should fall outside scope as the agency staff do not directly contract with the employer to do work. There is also a saving provision allowing employers to ignore those who are not on normal payroll and where it’s not reasonably practicable to obtain the relevant pay data.
  • Snapshot date: this has changed from 30 April to 5 April.
  • Reduced skewing of results: employees on leave such as maternity leave who are receiving reduced or no pay can be excluded from the overall mean/median pay gap calculations and from the pay quartile calculation. This is intended to prevent pay gaps from being temporarily exacerbated because of female staff who are not receiving their normal pay whilst on leave for a temporary period.
  • Pay quartile calculation: the regulations clarify that the quartiles will consist of equal numbers of employees, rather than splitting the pay range into four equal bands.
  • The methodology of calculating the hourly rate of pay and an employee’s working hours has been extensively clarified.

Problem areas

  • International employees who are not based in Great Britain are likely to be in scope if they have “a strong connection with” Great Britain. You may wish to put in place a protocol to help identify which international staff, such as secondees, are in and out of scope.
  • Deferred bonuses are not comprehensively dealt with in the regulations. The regulations now provide that share incentives will be treated as being paid, in broad terms, at the time that they incur an income tax charge or would incur such a charge as unapproved arrangements. It is still not clear when deferred cash bonuses are treated as being ‘paid’. If the treatment is to be consistent with share incentives this will also be when they are taxed. We hope that this will be clarified in the forthcoming employer guidance.
  • Bonuses paid during the snapshot period: bonuses paid during the snapshot pay period must still be included when working out the overall mean and median pay gap figures and the quartile pay band figures. Bonuses may well skew the pay gap calculations. This penalises employers who pay bonuses during the snapshot pay period rather than at any other time of the year. Although the Government has tried to manage this by including in the calculation only a pro-rated element of the bonus for the snapshot pay period, the inclusion of any element of bonus still skews the results. Employers may wish to consider addressing this in their narratives.