Research by the Institute for Fiscal Studies has found that the hourly wage of female employees is on average 18 per cent lower than that of men.
Despite this gap having fallen from 28 per cent in 1993, it remains substantial (with the gap widening for women after a child is born, up to 33 per cent after 12 years).
Seeking to combat this inequality, the government has brought s78 of the Equality Act 2010 into force, which enables regulations to be made requiring employers with more than 250 employees to publish information about the gender pay gap in their workforce. This is expected to come into force in April 2017 (meaning the first gender pay gap reports will be due by April 2018), but there is still uncertainty around exactly what that will entail.
The results must be published on the government and each employer’s website for 3 years and in future an employer may include a short narrative to explain its figures. The government will annually publish tables which highlight which UK companies rank amongst the worst for gender pay gaps within each industry sector.
It benefits employers to be aware of the reporting requirements to put their company in the best position to avoid the negative publicity associated with a large gender pay gap, and benefit from the good publicity associated with publicising commendable gender pay gap results. No sanctions other than negative publicity have been announced, but publishing large gender pay gaps may result in an increased number of unequal pay claims.
Which employers will be affected by the regulations?
Private-sector employers with 250 employees or more, measured on 30 April annually will fall within the scope of the regulation (there is no aggregation amongst group companies). It is likely that ‘employees’ in this respect will not encompass ‘workers’, which is likely to result in agency staff, contractors and possibly individuals on zero-hours contracts not forming part of this 250. Employees based overseas will not be included, but apprentices are likely to be.
What information are employers required to provide?
- Employers are expected to be required to publish:
- The difference in mean and median pay between male and female employees;
- The difference in mean and median bonus pay between male and female employees;
- The proportion of male and female employees who received a bonus payment; and the number of male and female employees in each quartile of pay distribution.
Each of these requirements will be expressed as a percentage; a percentage figure of 10 per cent represents men earning 10 per cent more than their female colleagues.
There is also an indication that pay, calculated on a gross basis, will include (amongst other things) basic pay, paid leave, bonus pay and shift premium pay, but will not include (amongst other things) overtime pay, expenses, benefits and redundancy pay. Bonus pay will therefore be reported both within regular pay and as a standalone reporting category. Parental leave (including maternity) will be included as pay, which may skew results as maternity pay is often lower than full-pay and is taken disproportionately by women.
When will employers be expected to report?
Employers will be expected to report the above information annually by 29 April for the preceding year. The first reporting date is likely to be the 29 April 2018, encompassing all information from 30 April 2017 to that date.
How can employers ready themselves for the regulations?
The most important thing an employer can do is ensure they collect all necessary data to comply with the reporting requirements, and implement this collection at the earliest available opportunity. If an employer puts in place a system where this information is stored and updated, compiling the reports every April should be a simpler process. Consider undertaking ‘trial runs’ to ensure the system in place is accurate.
Employers should also focus on the purpose of the reporting as well as the practicalities and consider if they adopt the values they promote; is there a culture of paying men and women equally? If not, question why that is the case, is there a valid reason for this disparity, and if not, consider putting in place more stringent practices to ensure that going forward men and women are paid equally.
If the government publish a table which displays you to have a large gender pay gap, ensure you are in a position to explain the valid reasons behind the figures if there are any, or show how you have been and continue to take action to narrow the gender pay gap in future.
Justin Govier is a partner and head of employment at IBB Solicitors, and Ed Marchant is a trainee solicitor at IBB Solicitors.