The long awaited response to the gender pay reporting consultation was published today, along with draft regulations. Those regulations introduce a new duty on large employers to publish the difference in pay between men and women across their organisation. In this alert, we set out the key points of which employers should be aware.
Who will be affected?
All employers in the private or voluntary sector with at least 250 UK based employees will have to publish pay information showing the gender pay differences in their organisation.
What do employers have to report?
Employers must report the overall difference in the hourly earnings between men and women on both a mean and median basis. The median is used to avoid the distortion of a small number of very high earners, whereas the mean will take into account the full earnings distribution. Hourly earnings will not include overtime payments and there will be no requirement to distinguish between full and part time employees.
In addition, employers will be required to separately analyse bonus payments made in a 12-month period and publish the difference between women and men.
To add a level of granularity which may help explain pay differences within an organisation, employers will also have to report on the number of men and women working across salary quartiles. Employers will calculate the four salary bands themselves, based on their overall pay range.
Furthermore, employers will be encouraged to provide a narrative to their figures. Even though this will not be compulsory, it is expected that many employers will wish to provide some context to help explain any differences in pay.
Where and when should employers publish the information?
Employers must publish the gender pay information on a website accessible to employees and the public. They must also send evidence of compliance to the government, which has said that it may consider disclosing the identity of employers who fail to comply.
The obligation will be to publish the information annually, on a date to be determined by the employer.
How soon will employers have to publish the information?
The government will be consulting on the draft regulations until 11 March, and it is intended that the final regulations will come into force in October 2016. After that it is anticipated that there will be a requirement to have a snapshot of data prepared for April 2017, with employers having to publish the first gender pay reports by 30 April 2018.
What do employers need to do now?
It is not too early to start preparing. Employers are advised to review their current pay practices to help them understand any differences that may exist. By analysing the rationale behind the figures, pay processes and structures, employers will be able to identify risk areas and take steps to deal with obvious disparities in good time. In addition, by understanding their pay arrangements, employers will be able to better manage and present the information in context in advance of having to make it public.
We will continue to keep you up to date with developments on this important topic so please watch out for further briefings.