The government has published its response to the ‘Closing the Gender Pay Gap’ consultation, and has issued a fresh consultation containing the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016. The only question in the consultation is whether any modifications are required. The government’s stated intention is to bring the Regulations into force in October 2016.
The gender pay gap refers to the fact that average pay for men is greater than that for women. In 2015, the gap was 9.4% for full-time employees and 19.4% for all employees (according to ONS statistics, April - June 2015). The new mandatory reporting measures are intended to help to reduce the pay gap, with a view to ensuring equal pay for men and women.
Which employers will be affected by the new reporting requirements?
Employers with 250 or more ‘relevant employees’ as of 30th April 2017 (or on any anniversary of that date) are caught by the regulations and will have to report on their gender pay gap. Relevant employees are those who ordinarily work in Great Britain and whose contract of employment is governed by UK legislation.
‘Employers’ is interpreted widely and includes not only companies, but also LLPs, partnerships, limited partnerships, unincorporated bodies, or any other type of employing entity.
What do we have to report?
Employers affected by the regulations will have to report the following information about their staff:
- The difference in mean pay between male and female employees, expressed as a percentage;
- The difference in median pay between male and female employees, expressed as a percentage;
- The difference in mean bonus pay over the preceding 12 months between male and female employees;
- The proportion of male and female employees who received bonus pay during the preceding 12 months; and
- The numbers of male and female employees according to the employer’s quartile pay bands. Quartile pay bands are calculated by listing all relevant employees in order of their hourly pay, then dividing that list into four ‘quartiles’ (each containing a quarter of the organisation’s employees). This shows the distribution of pay across the organisation.
How is pay calculated?
An employee’s pay is calculated as their hourly rate during the pay period in which 30 April 2017 falls. A pay period could be weekly, fortnightly, monthly, etc. depending on how the employer usually pays its staff.
Pay includes: basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay, and other pay such as car allowances paid through payroll, on call and standby allowances, and clothing, first aid, or fire warden allowances.
Pay does not include: overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay, or tax credits.
What counts as bonus pay?
“Bonus” includes payments received and earned in relation to profit sharing, productivity, performance and other bonus or incentive pay, piecework and commission. It also includes long term incentive plans or schemes and the cash equivalent value of shares on the date of payment.
Do we have to publish anything alongside the figures?
The regulations only require companies to publish the figures themselves. Nonetheless the government has said that it will ‘strongly encourage’ employers to publish an accompanying report to contextualise the information. Government guidance on what to include is expected later this year.
The (optional) report could be used as an opportunity to explain why a pay gap exists, or to give further information about the figures. Companies can also set out details of measures they are taking to address the pay gap going forwards, such as recruitment policies or training and development opportunities for existing staff. This sort of information could help to deal with the potential reputational issues arising out of a significant gender pay gap.
When do we have to publish the figures?
Assuming the regulations come into force as expected on 1 October 2016, the first trigger point for the data snapshot will be 30 April 2017. Companies then have until 29 April 2018 in which to publish the first set of figures.
New data will be captured on 30 April of each year, and in each case companies will have 12 months in which to publish their report.
How and where should the information be published?
The figures must be published on the company’s website and must remain accessible to members of staff and to the public for at least three years. The figures must also be submitted to a government website through which compliance will be monitored.
Are there any penalties for non-compliance?
Not at the moment, no, although the government has said that it will monitor the position closely and may consider imposing penalties in the future.
There is a reputational risk to a company if it does not comply with the new regulations, as there is likely to be a high degree of public interest and press attention, particularly as the first reports are published.
The government has also stated that it may consider producing league tables by sector using the data submitted to its website, and potentially ‘naming and shaming’ employers that do not comply.
What can we do now?
According to the government’s consultation paper, 62% of respondents within scope of the regulations are already able to calculate an overall gender pay gap figure.
If you do not have the ability within your organisation to calculate the necessary reporting figures, you should start looking now for a software solution that would allow you to do so, or consider changing the way in which your data is organised in order to facilitate collection of the necessary information.
For those companies that can calculate the pay gap already, it is advisable to run the calculations and see what the situation would look like if you had to publish the information now. It might be necessary to review pay scales and remuneration of staff, as well as opportunities for career progression, training and development for both men and women within your organisation. Recruitment policies and practices should also be reviewed.