Mishcon de Reya
The Gender Pay Gap
Practical Law interviews Jenny Barnes and Will Winch of Mishcon de Reya LLP
New reporting obligations were introduced in April 2017, requiring employers to publish data relating to their gender pay gap.
Who will be affected by the new reporting obligations?
So, large employers, large employers in the private sector are covered, that’s employers who employ more than 250, 250 or more, employees. Now, employees, for these purposes, are quite a widely defined group so it’s the definition that’s used in the Equality Act of Employees that’s relevant for these purposes. So that means that it’s workers who are employed either under a contract of employment or a contract for services where they’re providing the services personally. This will therefore include employees in the traditional sense, workers including part-time workers, fixed term workers etcetera, but zero hours contractors, casual workers will be caught as well but also the wider sense of, in one sense LLP members although there is a slightly tricky bit about that but LLP members will be caught in relation to whether an employer employs 250 or more so whether it falls within scope although the LLP members will be taken out of the equation for the calculations, but also consultants as well, the people who are providing their services, personally, as consultants will be captured in that definition of whether 250 people are being employed, and remember it’s 250 people rather than 250 full-time equivalent roles so if, even if you’ve got ten people doing point one of a role, you’ve got ten people, you haven’t got just one role at that point.
What about group companies?
The good news for a lot of group companies, in some ways, is that you treat each company separately. Now, that may mean that you could have an example where you’ve got a group with ten companies, each of those companies employing 249 people and although they employ as a group nearly 2,500 people they won’t actually come within the scope of the reporting regulations at all. ACAS suggests that people who are around the 250 should probably think about reporting in any event but in that specific example there will be no actual requirement for them to do so. Now, the flip of that of course is that group companies will therefore have to make quite a lot of separate reports for each of their group companies which may or may not be a good thing for them because they might be able to compartmentalise some of the bad news into one of their group companies and have other group companies with very good gender pay reporting figures.
What data will employers have to publish?
There are six different figures and I find it useful to compartmentalise them into two sections because you have three figures that relate to a calculation that’s connected to an hourly average rate of pay and you have three sets of figures that are relating to bonus data that looks back over a year’s period. The three kind of data points arising from the hourly pay are an employer must show the mean difference male and female average hourly pay, it must show the median difference between male and female hourly pay – when I was quoting the 18.1% earlier that was actually the median average – and also in a slightly different way an employer, once they’ve worked out their hourly rates of pay for each employee, effectively the regulations require the employer to stack up their employees in order depending on their hourly rate of pay and split them into four equal sections with each section having an equal number of employees and then report within each section the proportion of men and women and that’s of course to give an indication of how the gender balance is looking across the different levels of pay within an organisation.
What pay period should employers use?
If we look at the two sections of data first of all we have the data connected to this hourly rate of pay. Here the regulations compel employers to look at the relevant pay periods and that depends on the pay period that the employer operates but it will be the pay period in which the 5 April of each year is included so, to give a typical example, if an employee is paid on a monthly basis the employer will be looking at the payroll for April. In relation to the bonus you are looking at the year gone by ending on the 5 April.
The importance of narrative
Well it really is to give employers a tool to explain themselves, I think. I think a lot of employers are naturally going to have a gender pay gap because of a lot of employers will follow the national trends and this gives an employer to explain why for instance a technology company is highly likely to be saying that we would love to recruit more females but over the past ten/twenty years the pool of female graduates that has undertaken the relevant degrees in science and maths is far fewer than men and so that’s caused a disparity within our organisation and so it gives employers the opportunity to explain themselves. It also gives employers the opportunity to, and the government encourages them, to explain what plans are being put in place to help address gender pay disparities and I think these are the principle purposes and also if an employer feels that as a result of certain calculations and the certain way in which it organises its staff or its rates of pay there’s a discrepancy that actually doesn’t reflect the practicality of the pay within the organisation they can explain that, potentially even provide alternative figures within a narrative showing that actually potentially they don’t have equal pay issues.
Will it affect the reputation of companies?
Organisations fear about their brand or their reputation, potentially there will be media attention, as companies start to roll out their gender pay reports, potentially most significantly among female recruits who I think are most likely to be of the section of society that’s directly and proactively seeking out these reports and being concerned if they’re not there if they ought to be.
Will new transparency help reduce the gap?
This is the million dollar question. I think that they could have a very positive effect. I don’t know that they are going to eradicate the gender pay gap because I am not sure that actually the gender pay gap is going to be down to the actions of those employers with 250 or more employees I think it is a far bigger societal problem that we’re facing which is to do with a number of issues.
What can an employer do to improve their gender pay gap?
I’m going to talk about the more systemic, real improvements that can be made rather than the superficial improvements that an employer might decide to implement to improve their own gender pay gap but that is, for instance, if an employer is worried that actually there are equal pay issues, equal pay audits which a lot of larger employers have done over the previous years and actually addressing women’s pay where it needs to be addressed, looking at the way that organisations structure part-time and flexible work, are they still operating on rigid, traditional corporate structures or can they implement more remote working and part-time working and not only for women but for men as well so part-time working isn’t something that’s given as a concession to a woman returning from maternity leave but something that’s encouraged generally throughout the workforce population, and looking at the way that part-time and flexible work is paid and trying to ensure that there isn’t an unfair disparity there. Considering positive recruitment policies and promotion policies as Will just discussed, and trying to analyse within an organisation why and when women may be dropping out and if anything can be done to encourage them to stay which is ultimately, potentially, to the great benefit of an employer that’s spent years training a woman and then is potentially losing that resource. And lastly, do think about discrimination and particularly unconscious bias, I think, and think about training that can be rolled out to managers and people making the hiring and firing and promotion decisions.
Mishcon de Reya