Mind The (pay) Gap

Issue 19

In its latest efforts to address the pay gap between male and female workers, the Government is planning to require large employers to annually publish data on their gender pay gap, seemingly in the hope that this will encourage private sector employers to tackle the issue head-on.

This mandatory reporting process will apply to employers with at least 250 employees as at 5 April each year. We anticipate that this new process will come into effect from April 2017 with the first deadline for employers to publish the relevant data on their websites being 4 April 2018, on the basis that employers will have 12 months to collate, analyse and publish the data each year. Whilst 4 April 2018 might admittedly sound like some way off, the potential administrative burden of these Regulations on employers should not be underestimated.

On 6 December 2016 the Government published its revised final draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the “Regulations”), providing some welcome clarification as to what an employer’s obligations are going to be under the new reporting process.

In particular, who will qualify as a ‘relevant employee’ for the purposes of identifying whether or not an employer is required to comply with the Regulations has now been clarified and it is clear that casual/bank staff and even potentially self-employed contractors will need to be included in the headcount and subsequent data analysis, depending on the exact nature of their engagement. However, the Government has acknowledged that it may be difficult in practice for employers to include all workers in their calculations, so the amended Regulations now include an express exception to the reporting requirements in respect of workers whom the employer does not have (and it is not reasonably practicable to obtain) the relevant data. This will no doubt be welcome news to those employers who engage a lot of casual workers.

The annual information that relevant employers will be required to publish on their websites is:

the organisation’s overall gender pay gap (expressed as a percentage), using both the mean and median hourly rate of pay for female and male employees;

the proportion of male and female employees in each of the organisation’s four pay quartiles;

the organisation’s overall bonus gender pay gap (expressed as a percentage), using both the mean and median bonus payments received by female and male employees over the preceding 12 month period; and

the proportion of female and male employees who received a bonus in that period.

The revised Regulations confirm that the calculations only need to take into account ‘full-pay relevant employees’, permitting employers to omit from their calculations anyone receiving reduced (or no) pay due to being on a period of leave. This addresses concerns that an employer’s pay gap could be negatively affected if they happened to have a significant number of female employees receiving statutory maternity pay during the relevant pay period.

In terms of what employers can be doing now to prepare for the implementation of the Regulations next year, you should start thinking about:

whether you are likely to be a ‘relevant employer’ as at 5 April 2017, by reference to the number of individuals you engage and the nature of those engagements;

analysing employees’ remuneration packages and identifying what payments will need to be included in the necessary calculations;

potentially carrying out the pay gap calculations now (for example using April 2016 figures) in order to identify whether you are likely to have a considerable pay gap in 2017; and

if you suspect you are likely to have a significant gap, how you can explain this gap in any accompanying narrative (including a narrative is optional under the Regulations, but advisable where the gap is significant and could have negative PR implications).

Once Parliament has approved the revised Regulations the Government has confirmed that non-statutory guidance will be published to accompany the Regulations. As there are still some areas of uncertainty surrounding the precise calculations, this guidance is eagerly-awaited by us all.

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