Last year the government pledged to "end the gender pay gap in a generation". The government believes that greater transparency is the key to accelerating progress and so, under regulations expected to come into force on 1 October 2016, it is introducing new mandatory gender pay reporting for employers of more than 250 people.
Gender pay gap reporting is entirely separate from equal pay claims that can be brought in the employment tribunal under the Equality Act. However, it is perhaps inevitable that disaffected employees seeking leverage to pursue an equal pay, or indeed a sex discrimination claim against their employer, will use any negative features of the gender pay gap information as evidence of unfair and discriminatory practices as part of their claims.
Conversely, positive gender pay gap information can be added to an employer's armour if it has to defend a claim, alongside giving an employer a competitive advantage when used to attract and retain high quality candidates at every level of seniority.
WHAT IS GENDER PAY REPORTING?
If, by 30 April 2017, you employ 250 or more 'relevant' employees in a single company, LLP or partnership then you will have to publish the gender pay gap in that business by no later than the end of April 2018, based on pay data for the pay period to 30 April 2017, and annually thereafter.
The following information must be published:
- The difference in both the mean and median average hourly pay for men and women. (Pay includes salary, bonuses, incentive pay, allowances, commission and family related leave payments, but excludes overtime, salary sacrifice arrangements, redundancy payments, benefits in kind or expenses);
- the number of employees falling within each of four pay bands (quartiles) to show the gender pay gap at different levels of seniority;
- separately, average mean bonuses for men and women in the 12 month period preceding the end of April (note that any bonus payments made in the month of April may therefore be included both in the calculation of the pay gap and the bonus gap); and
- the proportion of men and women receiving a bonus in that 12 month period.
Employers are entitled to produce an accompanying narrative, which may be a useful opportunity to explain a higher than expected gender pay gap. It is also an opportunity to highlight steps that are already being taken to address any underlying causes.
The information will need to be published on companies' websites (and kept available for three years), and be presented in a manner that is accessible to all employees and the public - sophisticated and incomprehensible spreadsheets will not work. The information will also have to be uploaded to a government-sponsored website and a director (or a designated member or partner for LLPs and partnerships respectively) will have to sign a statement to confirm that the information is accurate.
All employees, in the wider sense of the term, are likely to be covered if they ordinarily work in Great Britain. This includes those on sick leave, family related leave and sabbaticals. However, genuine equity partners are excluded, as are agency workers if they are employed by the agency. Casual workers on an umbrella contract and those on zero hours contracts engaged directly by an employer may well be included, as may members of LLPs and some self-employed workers.
HOW CAN I PREPARE MY BUSINESS?
- Check whether your business is likely to be in scope. Look at your group structure. How many people are engaged in each entity within your group and what form does their engagement take?
- Identify any casual workers/contractors/agency staff and determine whether they are relevant employees.
- Ensure your payroll and/or other systems are set up in such a way to enable you to easily produce the data for all different types of pay and by reference to the gender of all employees.
- Look at the timing of various payments, including bonus payments and payments under incentive plans, throughout your annual performance cycle. The first report will be based on a snap shot of data for the pay period to 30 April 2017 (for most employers who pay monthly, this will be the month of April).
- If you already have the relevant systems and processes in place, consider testing your current arrangements via an internal confidential audit, using the April 2016 pay period as the basis for your calculation. This may identify areas of risk and give you the opportunity to make changes now. Consider conducting the audit with the help of lawyers in such a way that the report may attract legal advice privilege.
- If your information suggests big gaps exist at certain levels - due to a lack of senior women, for example - consider ways to address this. Even if there is insufficient time for any action to impact on the figures for the first reporting cycle, being able to tell a positive story and demonstrate that action is being taken will help.
- Speak to others in your sector. How are they proposing to deal with their obligations? Applying a consistent approach across your industry may benefit you.