Gender Pay Gap Reporting

I heard a stark statistic last week that women in 2016 will earn what men earned in 2006! For that reason it’s obvious why attempts are being made to nudge employers into taking action to address the gap and after what seemed like eons of discussion about how this might be done we are now finally consulting over the detail of the Governments proposed system.

The new duty will apply from the 30^th April 2016 to any employer who has 250 or more employees working in the UK/governed by UK law. Those who are caught will have a year to issue a report which means in the first instance the first report will not be due until the 30^th April 2018, for the position as at 20^th April 2017.

The employer will have to publish information on their website which must be searchable and the information must be kept there for at least 3 years so comparisons can be undertaken. The information needs to be signed off by a Director and give five different kinds of data about equal pay within the business.

Before I go on to explain what that information is, its’ worth noting that there is no penalty for non-compliance and this is something that the Commission for Equality and Human Rights have picked up on this week and criticised heavily. The Government says they will review the position once the system’s up and running but there is no mechanism for either checking the accuracy of what an employer has published or teeth to take those who flout the law to task. That said the media and trade unions are going to be looking out for what organisations are doing and leaping on the data which it’s clearly hoped will be enough pressure to drive serious change. The Government has committed to naming and shaming the best and the worst practices within different sectors.

Pay for the purposes of the legislation means basic salary, maternity and sick pay, shift premiums and allowance and some bonuses but it does not include benefits in kind and overtime. The exclusion of overtime will reduce the gap (most women do less overtime) but the inclusion of maternity pay will also automatically increase the pay gap.

The first piece of information the employer will publish is the difference in “mean” basic pay. You are not obliged to provide any narrative or distinction between part time and full time workers for example but essentially if the gross hourly rate of pay of all the men employed by the employer in April is more than the gross hourly rate of pay of all female employees on the same date then the employer has to publish the percentage gap. Thus if the figure for men is £10 per hour and the figure for women is £8 per hour it’s the 20% gap that has to be published.

The second is the difference in median pay i.e. if you had a 100 employee the mid person will be the fiftieth person and it’s their hourly rate that has to be published. Again the difference between men and women is calculated and turned into a percentage.

The third difference is the difference between bonuses which is calculated over an entire year. Thus you would calculate what bonuses had been paid to men across the business the whole year which would include commission, long term incentive schemes, productivity bonuses etc and then the same figure for women again expressing any difference as a percentage. Whilst there may not be such a big gap in pay rates bonuses may be an area where things are dramatically different.

The fourth difference that has to be published is the proportion of men and women who receive bonuses so out of your 100 employees you may have 10 men who receive a bonus but only 5 women do – this data would highlight if an organisation pays a bonus to a handful of women in circumstances where that would skew the figures and mislead as regards the fact that women are actually being left out the bonus structure.

The fifth type of information that has to be published is the gender pay split broken down between quartile pay bands so within any pay bands that the employer has they have to split what is being awarded into four groups of 25% and in each of those groups highlight how many men and how many women there are. This will pick out, for example, if in the highest quartile there was a dominance of men and in the lowest quartile there was a dominance of women you would then be able to see the spread of for example women in the low pay category.

The Government is still consulting on this proposal so there is the possibility of some tweaking around the edges but we suspect at this stage in the game that is all it will be rather than wholescale change.

Whilst this doesn’t apply to the public sector immediately its likely separate public sector legislation will follow.

It will be interesting to see whether the changes affecting the largest companies drives serious change and the extent to which there will be a cascading effect e.g. will larger organisations start to put pressure on smaller ones to commit to the same sorts of things in tenders and when biding for work?

If you do have any questions please do not hesitate to contact me on adenton@refreshinglawltd.co.uk