In her first speech as Prime Minister, Theresa May promised to continue the work of her predecessor in addressing certain inequalities in society including, in her words, the reality that "if you’re a woman, you will earn less than a man". In 2016, the gender pay gap in the UK was 18.2%, meaning that on average, for every pound that a man earns, a woman earns just under £0.82. The centre piece of the Government's campaign to reduce the pay gap is legislation requiring larger employers to publish information on their own gender pay gaps, in the hope that greater transparency will lead to organisations generating their own solutions.
This legislation (The Equality Act 2010 (Gender Pay Gap Information) Regulations 2016) was published in final form in December 2016, and is expected to become law in April 2017. For an overview of the regulations and a reflection on the impact on employers, please click here. We have worked with our clients to develop a tool to help employers prepare for and deal with their new obligations. Please contact Greg Campbell or your usual Mishcon contact for further details.
Acas and the Government Equalities Office have now also published a guidance document designed to accompany the regulations - "Managing gender pay reporting in the private and voluntary sectors".
The guidance explains which organisations need to publish their gender pay gap figures and sets out a step-by-step guide to complying with reporting obligations. The guidance also offers some background on what the gender pay gap is and how the Government hopes to address it with mandatory gender pay gap reporting. The guidance also encourages employers to come up with an "action plan" and tackle underlying gender pay disparity by keeping track of their data on gender pay, ensuring policies and practices are up to date, providing training to managers, managing family friendly leave and flexible working successfully, reviewing career and talent development and even considering "positive action" in the form of "support, training and encouragement" to female employees.
In terms of ensuring that employers comply with the mandatory reporting regime, the guidance suggests that the Government is relying principally on employers being concerned about the reputational risks associated with not reporting. The guidance does state that the Equalities and Human Rights Commission has the power to enforce any failure to comply with the legislation, although there is some doubt over whether the Commission has sufficient resource or even legal authority to actually do this.
The guidance has helpfully clarified a few points from the draft legislation that had HR professionals scratching their heads. It confirms that a deferred cash bonus should be included in the figures reported at the point at which the payment is actually received by the employee. For example, a cash bonus awarded because of good performance in 2015 but actually paid in March 2017 will need to be included in the relevant calculations for the reporting year including 5 April 2017. The guidance has also clarified that employees working overseas should be counted in gender pay reporting if the relevant employee has a sufficient connection to the UK to bring a claim under the Equality Act 2010 in the Employment Tribunal. Although this is useful clarification, many employers dealing with numerous overseas' employees or mobile workforces are daunted by the challenge of working out exactly who is in scope.
It will be very interesting to observe gender gap publication over its first year in operation from 7 April 2017. Given the national gender pay gap, few organisations can expect to be publishing reports showing overall pay equality between their male and female employees. We expect employers will be directing significant efforts to justifying or explaining pay gaps in accompanying narratives and considering effective PR and communication strategies connected to any release of their gender pay gap information.