The regulations, which will apply to private and voluntary sector employers, were due to come into force on 1 October 2016. The commencement date has however been pushed back to 30 April 2017.
The government also intends to introduce the same requirement for public sector employers within the same timeframe.
This move by government seeks to increase transparency around gender pay differences.
What is the gender pay gap?
The gender pay gap refers to the average difference between men and women’s gross hourly pay. In April 2015, the Annual Survey of Hours and Earnings conducted by the Office for National Statistics recorded the gender pay gap for full-time employees as being 9.4%.
What are the obligations under the regulations?
A relevant employee is someone who ordinarily works in Great Britain and has a contract of employment governed by UK legislation. When the regulations come into force, organisations with over 250 relevant employees must publish an annual report on their own websites, as well as submit evidence of compliance to the government, reporting the gender pay gap in their organisations. In addition, organisations must publish a separate gender bonus gap report.
The reports must be in English and must be accessible by both employees and the public; therefore they must be published on a searchable UK website.
Organisations will be required to publish their first report within 18 months from 30 April 2017. This is to allow employers time to introduce new systems or processes to analyse their gender pay gap. Thereafter, organisations will be required to publish their reports annually.
The reports must be available online for three years following publication.
How is the gender pay gap calculated?
Employers must calculate the ‘gross hourly rate of pay’ for women in comparison to that for men within their organisation. They must then calculate the percentage difference between:
1. the mean (average) gross hourly rate of pay of women in relation to men; and 2. the median gross hourly rate of pay of women in relation to men.
The definition of ‘pay’ includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances). However, it does not include any overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay or tax credits.
Bonus pay must be included when calculating the employee’s normal pay, although bonus payments will be calculated separately and published in a separate gender bonus gap report.
The gross hourly rate of pay is determined using the weekly pay for each relevant employee and dividing this by their weekly basic paid hours during their normal pay period in which 30 April 2017 falls.
Organisations must categorise their employees, based on their pay, equally into four different pay bands (from pay band A (which is the quartile of employees on the lowest pay) to pay band D (which is the quartile of employees on the highest pay)). They must then report on the gender split for each of those pay bands.
The secretary of state will review the regulations within five years of commencement. After this, the secretary of state will publish a report to determine whether the regulations meet the policy objectives or if they simply impose an unnecessary burden on employers.
Employers covered by the regulations will be expected to capture their first set of gender pay gap data in April 2017 and to publish the information before April 2018. Therefore, it will be prudent for employers with over 250 employees to start planning the steps necessary to comply with the reporting requirements.
This will include identifying those who fall within the scope of the regulations. For example, where there is a large pool of casual workers, bank staff or agency workers, how will they be treated?
Employers will also have to assess whether their current payroll systems can produce the necessary pay data. In our view, it would be worthwhile for organisations to identify someone to take the lead for publishing the pay information required by the regulations and for signing the written statement confirming the accuracy of the published information.