In this edition of the Bond Dickinson Employment Briefing we focus on the Gender Pay Gap Regulations. Those who employ 250 or more employees will in future be required to publish gender pay gap details highlighting the difference in gross pay and bonus payments made to female, as compared with male, employees. The Regulations are more extensive than anticipated and deserve careful consideration. We summarise the provisions and consider the practicalities of compliance.
Who is affected?
The Regulations apply to private and voluntary sector employers in England Wales and Scotland with at least 250 ‘relevant’ employees, being those who ordinarily work in Great Britain under a contract governed by UK legislation.
Public sector employers will also be required to publish gender pay gap information with the Government due to consult with relevant bodies to ascertain how this will work in practice. This will no doubt include a consideration of how such a requirement fits with the existing Public Sector Equality Duty.
When is publication required to take place?
The commencement date for the Regulations is 1 October 2016. However, publication is not required immediately, but must take place within the 12 month period beginning 30 April 2017 in respect of pay details in the pay period that includes 30 April 2017. Bonus pay details also have to be published within 12 months of 30 April 2017 but relate to bonuses paid between April 2016 and April 2017.
Where must publication take place?
The relevant gender pay gap information must be published for a three year period on a website that is accessible to employees and the public. The information must also be uploaded to a government sponsored website.
What must be published?
The following information must be published:-
- The overall mean and median gender pay gaps
- The difference in mean bonus payments
- The proportion of male and female employees that receive a bonus
- The number of men and women in each quartile of the organisation’s pay distribution
- A signed statement of accuracy – confirming that the information published is accurate.
How is the information that must be published calculated or determined?
The main points to note in are:-
- Pay is calculated by reference to the pay period which includes 30 April 2017 and includes a range of payments that are made in respect of normal working hours, including shift premium pay, and bonus pay.
- Bonus pay includes payments in relation to profit sharing, productivity, performance and other bonus or incentive pay, piecework and commission, long term incentive plans and the cash equivalent value of shares on the day of payment.
There are 6 values that have to be determined in order to calculate the required gender pay gap figures, set out below as A-F.
The necessary calculations involve extracting and sorting gross hourly pay information relating to both male and female employees in such a way that both the mean and median values can be identified. The most simplistic way of achieving this is to produce two lists, one for male employees and the other for female employees, each containing details of the gross hourly rate of each employee, in order from lowest to highest.
The mean gender pay gap
The “mean” gender pay gap focusses on the average pay of female employees as compared with the average pay of male employees. The relevant calculation is:-
(A-B) x100 A
A = The mean gross hourly rate of all male employees
B = The mean gross hourly rate of all female employees
The median gender pay gap
The median figure is the middle figure on each list of hourly pay values. If there are two figures in the middle of the list the median is achieved by adding them together and dividing by 2.
The relevant calculation is:-
C = The median gross hourly rate of all male employees D = The median gross hourly rate of all female employees
The number of men and women in each pay quartile
The numbers of male and female employees in each pay quartile must also be published. This involves listing the gross hourly rates of pay for both male and female employees in order of increasing value. The list is then divided into 4 equal parts with those lowest paid falling within the first quartile (A), and the highest paid the fourth quartile (D).
The difference in bonus payments to male and female employees is calculated on a mean basis as follows:-
(E-F) x100 E
E = The mean bonus pay of all male employees in the 12 months period ending 30 April
F = The mean bonus pay of all female employees in the 12 months period ending 30 April
The proportion of male and female employees who received bonus pay during the relevant period must also be published.
Consultation on the Regulations
The government is seeking views on the draft Regulations. The single question asked in the consultation is “What, if any, modifications should be made to these draft regulations?”. We will be responding to the consultation and welcome your views. If there are particular issues you would like us to raise in our response to the consultation please contact Lorraine Heard, Hilary du Randt or Lisa Robertson.
- The Regulations are more extensive than anticipated with a requirement to publish ‘mean’ as well as ‘median’ gender pay gap figures. Mean values are influenced to a much greater extent by small groups of highly paid individuals.
- There is less time available to prepare to publish gender pay gap information than might initially appear to be the case. Although publication does not need to take place until April 2018, the pay calculation relates to payments made in April 2017 and on bonus payments made between April 2016 and April 2017. An early consideration of the impact of the Regulations will allow more time to consider how best to address any areas of concern.
- The requirement to upload the information to a government sponsored website will make it easier for it to be accessed and for comparisons to be made between different organisations.
- The publication of gender information relating to the earnings distribution by quartile will highlight concentrations of less well paid female employees.
- As bonus payments are also included in the calculation of hourly rates there is a ‘double whammy’ effect for organisations that pay bonuses to only part of their workforce, particularly where the employees who receive such payments are predominantly male. As there is a national gender bonus gap of 57% this is a prime area for equal pay challenges to arise.
- The definition of pay includes payments relating to shift and on call working patterns. This could adversely affect the overall figures but in a way that can be explained and justified from an equal pay perspective. Organisations will be able to provide a voluntary narrative to accompany the published gender pay gap information. In some situations this is likely to be a highly important document.
- A guidance note is due to be published this year which will address the question of how to account for different governance structures such as subsidiaries and parent companies. This will be of particular interest to corporate Groups where the companies in the Group differ in gender make-up and have different pay structures.