On 2 August 2018, the Business, Energy and Industrial Strategy Committee (the Committee) published its report on gender pay gap reporting, making several proposals to change the reporting requirements.
The report notes that while the median pay gap across the economy is 18% in favour of men, at an organisational level, the new figures reveal some alarming truths: with gender pay gaps of over 40% not uncommon in some sectors and 78% of organisations reporting gender pay gaps in favour in men. New analysis by the Committee finds that 1,377 employers (13% of the total) have gender pay gaps in favour of men of over 30%.
The results have led the Committee to call for more to be done to close the gender pay gap and more quickly. The Committee’s key recommendations for closing the gap are:
-Requiring all employers to publish alongside their figures, a narrative to explain them and an action plan for closing the gap;
-Reducing the threshold for reporting from 2020 to all those employers with 50 employees or more;
-Clarifying the sanctions the Equality and Human Rights Commission can impose on those who fail to comply.
A real concern for the Committee is that only around half of the UK workforce are expected to be covered by the present reporting requirements. Currently, gender pay reporting is only compulsory for employers with 250 or more employees. The Committee’s findings are that the pay gap is higher in smaller businesses and as a result, the Committee recommends that Government widen the net of organisations required to publish gender pay gap data to those with 50 employees or more.
Considering half of the working population were not included in the first round of published figures, one can certainly see the need for reducing the reporting threshold if the UK is to make real progress in closing the gender pay gap. However, the reporting exercise requires considerable resource which isn’t readily available to those businesses. There are also areas of ambiguity in the reporting guidance which has led to organisations interpreting the rules in different ways. That lack of resource and failing to clarify those ambiguities may lead to reporting irregularities, distorting the true figures and possibly giving a false impression that the gender pay gap is narrowing. It could also potentially place a greater burden on the EHRC in its efforts to establish compliance. Government must therefore balance the need for reducing the reporting threshold against the regulatory burden weighing heavily on the shoulders of SMEs and medium-sized employers.
It is unsurprising that the results have yielded significant gaps in favour of men in many sectors. Whilst there are a number of factors contributing to the UK’s gender pay gap, the Committee’s report places the onus on businesses and investors to drive change to tackle the gender pay gap, with those failing to do so being held to account. The second deadline for reporting is 4 April 2019 (30 March 2019 for public bodies). As we approach that deadline, it will be interesting to see how employers have fared in reducing their gap. Larger businesses need to be implementing their strategy to close the gap now, since the third snapshot date is fast approaching in Spring next year after which organisations’ progress in closing the gap over the first three reporting years will be scrutinised.
The report follows the recent announcement that all 10,000 employers the Government expected to have to report their gender pay gap figures have done so. This is an impressive outcome considering the absence of any penalties for non-compliance. However, if the threshold for gender pay gap reporting is reduced, and the Government is serious about tackling the gap, it will be surprising if they don’t introduce tough sanctions for those that fail to do so.
For more information on gender pay gap reporting requirements, please contact Charlie Barnes, Associate Director, at charlie.barnes@rsmuk.com or your usual RSM contact.
