Gender pay gap reporting
Private and voluntary sector employers
The new duty requiring big employers to publish data on their gender pay gaps will come into effect in April 2017. The revised draft Regulations were published on the 7th December 2016 and, having received parliamentary approval, are now awaiting sign off by ministers.
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 apply to private- and voluntary-sector organisations with 250 or more employees.
Broadly similar rules for the public sector were laid before parliament on the 20th January 2017 – see below..
Which employers are affected by the Regulations?
The Regulations for the private and voluntary sectors cover any employer with 250 or more “relevant” employees in England, Wales and Scotland (but not Northern Ireland) on 5 April 2017 – and on the same date each year after that.
In companies with a group structure, each legal entity will need to report its data. There is no legal requirement on smaller employers to report data, but they will be encouraged to do so. Employers whose headcount varies will have to report in any year in which the headcount is 250 or more.
How is an employee defined?
The Regulations apply the same definition of employee as the Equality Act 2010. This is a broad definition which includes zero hours’ workers, apprentices and some self-employed people.
Agency workers will be included in any reporting by the agency with which they have a contract of employment.
Employees will be covered by the Regulations if they are employed on 5 April, work mainly in England, Wales or Scotland, and are on full pay. Employees on reduced rates of pay while on maternity leave or sick leave are excluded.
Employers are not required to include data relating to an employee employed under a contract personally to do work, and the employer does not have, and it is not reasonably practicable for the employer to obtain the data.
How is pay defined?
‘Ordinary pay’ means basic pay; allowances; pay for piecework; pay for leave; and shift premium pay. It does not include overtime pay; redundancy pay; pay in lieu of leave, or non-monetary remuneration.
‘Bonus pay’ means pay in the form of money, vouchers, securities, securities options, or interests in securities; and pay that relates to profit sharing, productivity, performance, incentive or commission. Non-consolidated bonuses are also included.
What data must be published?
Employers are required to publish six metrics:
- The difference between the mean hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees ( ‘the mean gender pay gap’);
- The difference between the median the mean hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees (‘the median gender pay gap’);
- The difference between the mean bonus pay paid to male relevant employees and that of female relevant employees (‘the mean gender bonus gap’);
- The difference between the median bonus pay paid to male relevant employees and that of female relevant employees (‘the median gender bonus gap’)
- The proportions of male and female relevant employees paid bonus pay (‘the proportions of men and women getting a bonus’); and
- The proportions of male and female relevant employees in the lower, lower middle, upper middle and upper quartile pay band (‘the proportion of men and women in each of four pay quartiles’).
Calculations for the pay gap metrics are to be based on a single pay period around the “snapshot date” of 5 April, while bonus gap metrics cover the whole year to April 2017. The Regulations provide detailed instructions on how the figures should be calculated,as does the joint Acas/GEO guidance – see below.
What format should the report take?
The data required from employers must be published in English, by April 2018, on a company website that is accessible to employees and the public. The report must also be uploaded to a government website, which is currently under development.
There is no requirement to publish any accompanying narrative or commentary, but as many organisations will wish to explain what the figures mean, it is likely that the government website will allow space for a commentary. The ACAS/GEO guidance suggests that the written statement signing off the report – see below – should also include the supporting narrative.
The report must remain on the website for three years, but can be left up for longer if the employer so chooses.
Who has to sign off the report?
The report must be accompanied by a written statement signed by a director, or other responsible person, vouching that the report is accurate. The ACAS/GEO guidance lists the appropriate signatories.
Will there be additional guidance?
Acas is expected to publish guidance expanding on the core Regulations by the end of January 2017.
The Government has also said that it will provide a package of support for employers including UK wide events, multimedia guidance on the calculations and targeted support for smaller employers and those least advanced on gender equality.
Will there be guidance for employees?
There will be no guidance as such for employees, but the Government has launched an online tool that allows the public to find out the gender pay gap for their occupation as defined in the standard industrial classifications used by the Office for National Statistics. For more on this go to Tools.
What are the sanctions for non-compliance?
There are no penalties as such, but this will be reviewed if levels of compliance are not satisfactory. However, non-compliance would amount to an unlawful act falling within the existing enforcement powers of the Equality and Human Rights Commission. The Commission’s powers of enforcement are set out in the Equality Act 2006. You can find the Act here.
Where can you find the draft Regulations?
You can read the draft Regulations here.
You can read the Government’s response to the second round of consultation on the regulations here. This is helpful in explaining why the regulations are as they are.
Where can you find the ACAS/GEO guidance?
You can find the guidance here.
Acas have also produced a gender pay reporting notification template. NB, this is not a template for reporting your metrics, but one for letting your employees know what you are doing. You can find the template here.
Public sector employers
The draft Regulations requiring public-sector employers to report on their gender pay gap were published on the 20th January 2017.
The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 will come into force on 31 March 2017.
The requirements for the public sector largely mirror those for the private sector (see above), but two key differences are that the public-sector requirements are being introduced as part of the existing public-sector equality duty, rather than as a stand-alone requirement, and that the annual “snapshot” date on which the pay information is collected is 31st March for public sector employers, as compared to 5th April for private and voluntary sector employers.
Employers have 12 months from the snapshot date in which to publish the pay information. This means that public-sector employers must publish their first figures by 30 March 2018.
The information will have to be published on the public authority’s website and provided on a Government site which is currently under development.
While the aim is to make the reporting requirements consistent across the public and private sectors, the public sector already has specific duties on equality, which the Regulations have to reflect. There are also differences between the public sector equality duties in Wales and Scotland as compared to England, and it remains to be seen how these differences will work out in practice.
Scotland has already said it will require all public authorities with more than 20 employees to publish their pay gap every two years and an equal pay statement every four years.
Similar initiatives across Europe
The law firm Eversheds has looked at similar initiatives across the European union and has produced a briefing on their findings. You can read this briefing here.
Employer views of gender pay gap reporting
In the summer of 2016 the Pay Equality Research Consortium looked into employer views on the forthcoming regulations. A report on the preliminary findings looks at how informed employers feel, their measures of preparation, and how effective they feel regulations will be in overcoming pay gaps.
Interviews revealed that employers have mixed views about the possible effectiveness of GPG reporting: yes, no, and uncertain. The majority of interviews reflected the challenge of the task ahead and the comparatively limited impact that such legislation is likely to have. There was the feeling that this probably wouldn’t work for smaller organisations; that the complexity of the measurements and the process was such that the effects of this weren’t really understood. One respondent pointed to their non-compulsory nature as a reason to suggest they wouldn’t have much impact.
Employers recognised that there is scope for many different explanations for pay gaps and the impact of reporting gaps will be lost in narrative. There was also the sense that public reporting wouldn’t change behaviours of employees.
There was a more positive perspective from larger organisations where this was seen as a ‘wake-up call’. Employers acknowledged reporting could be potentially quite powerful in sectors where comparisons can be made and employees are more likely to move between employers. It was also seen as a valuable process in terms of starting the debate. As one respondent put it: “If it gets measured it gets done”. But the need for implementation and follow through was seen as key. It was also seen as a means to start to shift cultures. In essence it was seen as being a stimulus for change (the media could play a role here too) where organisations wouldn’t want to be named and shamed.
A number of concerns were raised:
- That employers would not be given the time to understand or prepare
- That reporting pay gaps would be little more than more that rhetoric or ‘advertising’
- That measures would be too complex
- That impact would be hard to gauge, with little to no evidence of this type of regulation having worked elsewhere
- How gaps would be explained and qualified (potentially neutralising the intended impact)
- How the figures were going to be compiled and whether it would be a fair and true reflection of the position. This included questions around what was included and what was not, and whether fair comparisons were possible.