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21 April 2017

Mandatory gender pay gap reporting

The mandatory gender pay report needs to be signed off by senior management before being published on a relevant employer’s own website and uploaded to the appropriate Government website.  For those employers affected by this new legislation, it needs to be on the radar of the executive board or managing committee.

Following closure of the consultation on draft gender pay reporting regulations last year, a “final” draft of the Equality Act 2010 (Gender Pay Reporting Information) Regulations 2016 was provided in December 2016, which came into force on 6 April 2017.  Affected employers need to ensure they have taken a snapshot of their pay data as at 5 April 2017 so that they can start preparing their report for publication no later than 4 April 2018.

The timetable in the regulations is more relaxed than anticipated.  The private sector employers in scope will have a minimum of 250 “employees”, although note that the definition of “employees” is the broad Equality Act definition which includes employees, agency workers, apprentices, and some self-employed where they provide work personally (but not members or partners).  Casual workers are a tricky one, depending on when they are working.  Certain overseas employees might also be caught if their employment is within our jurisdiction.  Approximately one-third of our workforce and more than 8,000 employers will be affected by the regulations. 

Reporting obligations

The regulations require publication of overall gender pay gap figures, calculated using both the mean and the median. These measures are intended to give employers “a better understanding of any gender pay gaps they identify” and greater “depth to the analysis”.  Whilst “mean” data provides average pay data, “median” figures will be different as small numbers of very high and very low earners in a business will not have a distorting effect on the percentage.  It seems unlikely that, at least within the next five years, private sector employers with less than 250 employees will be brought within the scope of the legislation.

Having worked out whether the employer’s “relevant employees” meets the 250+ threshold and is therefore in scope, the employer then needs to consider the six reporting obligations.  These are: 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 bonus pay paid to male and female “relevant employees”; (5) the proportions of male and female “relevant employees” who were paid a bonus; and (6) the proportion of male and female “full pay relevant employees” in the lower, lower-middle, upper-middle and upper quartile pay bands.
Publishing gender pay gap data by grade (or job title) has been disregarded as many employers may not have an appropriate grading structure and also the data could become confused on a merger or acquisition.

There are new definitions for employers to understand.  For example, “full pay relevant employees”, for the purpose of calculating the first two reporting obligations includes employees who are not, during the relevant pay period, being paid at a reduced rate or nil as a result of being on leave.  What is to be included in the definition of pay and bonus is prescribed in the regulations as well as the method of calculating hourly rates of pay.

Where the employer does not have pay details for a relevant employee, for example because they are an agency worker, the employer is not obliged to report their pay data if it is “not reasonably practicable” to obtain their pay data.  It is assumed that the employer would have to request the pay data, but if the agency refuses to provide it, then the employer need not include it in their reported data.

There is no requirement to publish separate gender pay gap data for full and part time employees, even though women are more likely to be working part-time.
Employers are to calculate the data for each salary quarter; it is for the employers to calculate the relevant quartile.

Transparency

It is intended that transparency in gender pay gap analysis permits comparability between employees in one organisation and comparability between employers.  It is further intended to provide good practice initiatives which will lead the way for all employers.

Employers are encouraged to contextualise their gender pay gap data and provide a narrative, as well as information on the positive steps they have taken, but they are not obliged to do this.  However, where the figures throw up questions, employers will want to have an explanation for their own staff as well as potential new staff who might come across it on the internet.  Getting the narrative right (not too much and not too little) is important for retention and recruitment purposes and heading off potential equal pay queries.

Data is to be published in English, on a searchable UK website as well as provided directly to the Government on an annual basis.  Reporting any less frequently could result in lost momentum to positive changes to improve the gender pay gap.

Compliance

There is no additional compliance mechanism proposed under the regulations than that which already exists under the Equality Act 2010.  It is described as a “positive compliance regime”.  Primarily, this means that those employers leading the way will be highlighted and praised by the government.

There is potential for non-complying employers to be “named and shamed” as a result of periodic checks to assess the non-compliance. This process is favoured over any additional civil penalties as a result of the perceived success of the voluntary reporting scheme.

Costs of reporting must be borne by the employers, who, according to the Government, are likely to have over-budgeted for the cost of implementing these regulations in the run up to them coming into force.


This article was written by Emma Bartlett. For more information please contact Emma on +4402074276450 or at emma.bartlett@crsblaw.com.

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