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24 October 2017

Five gender pay reporting pitfalls in the Construction Industry

Gender pay reporting is the mandatory obligation for large employers (250+) to publish on-line specified gender pay data no later than 4 April 2018. Construction News reported in April 2017 the governments’ findings that the gender pay gap within the construction industry is up to 5 percentage points higher than the UK average. With the construction industry comprising 18% of the businesses in the UK in 2016, it accounts for 8% of employment in the UK, it is not an insignificant statistic. The proportion of female to male workers in this sector is recognised as imbalanced, as is the likelihood of gender pay disparities. Getting gender pay reporting right should be high on HR’s agenda in the construction industry.

Working out whether the reporting obligations apply to you

Calculating the number of “employees” to ascertain whether the company is caught by the reporting obligations is not straightforward. “Employees” has a broader definition than an employee working under a contract of employment. The statutory provision requires employers to also count individuals working under contracts of apprenticeship, contracts for service (e.g. workers and agency workers), those self-employed persons who contract to provide work personally, and some employees working overseas. Therefore, even though normal employee headcount may be below 250, with these additional workers and self-employed contractors, a company may unexpectedly fall within scope.

Calculating the hourly rate

It is easy if the group of relevant employees are all on the same contract, paid at the same time, and only earn salary and possibly a cash bonus. Calculating the hourly rate is quickly complicated, however, if there are different pay frequencies, bonus schemes, non-cash elements and allowances. If the pay data is not held by the employer (e.g. because it relates to an agency worker), the employer must take reasonable steps to find it out. Certain payments and benefits are also excluded from the calculations of “pay”. If part of the compensation package is paid in equity, knowing when to include its value in reportable pay data is important. Finding the hourly rate for a handful of staff might be easy, but working it out for each staff member when there are different contracts in place makes it tricky.

The relevant pay period

If staff are all paid monthly, the pay period is easy to define, but where there are different pay periods, then analysing the pay data is different because different formulae will apply for calculating the hourly rate. There might also be some individuals who dictate to the employer how frequently any element of their pay is delivered, which gives rise to a different method of working out the relevant pay period and the appropriate hourly rate.

Analysing the data

Having captured data for pay paid in the relevant pay period (e.g. the one which includes 5 April 2016), employers now have until 4 April 2018 to analyse the data and contemplate whether to add a narrative. The data has to be published on-line (and left there for three years) so that it can be used as a comparison against each subsequent year’s pay data. 12 months sounds like a sufficient period to analyse the data, but in reality is probably just enough time to ensure that the statistics are no more than what is required and that a satisfactory explanation can be provided for any pay disparities. Without a narrative, hares could be unnecessarily set running.

Internal communications

The key method of enforcement will be peer pressure and risk to reputation, as the Government’s Equalities Office will seek to “name and shame” inadequate reporting. No doubt interest groups, employees and potential candidates will be watching how employers respond to their reporting obligations. Getting the communications right will be important, particularly where the company has expressed commitment to diversity and inclusion. This should be part of it.

Six reporting obligations

  • The difference between the (1) mean and (2) median hourly rates of pay between male and female “full-pay relevant employees”
  • The difference between the (3) mean and (4) median [annual] bonus pay  paid to male and female “relevant employees”
  • (5) The proportions of male and female “relevant employees” who were paid a bonus
  • (6) The proportion of male and female “full-pay relevant employees” in the lower, lower-middle, upper-middle and upper quartile pay bands.

This article was written by Emma Bartlett. For more information please get in touch via emma.bartlett@crsblaw.com or +44 (0)20 7427 6450.

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