Companies are increasingly being penalised for discrimination in the workplace. One such area that the Government is currently focusing on is gender equality.
In March 2016, the Government published their response to the consultation paper entitled “Mandatory Gender Pay Gap Reporting” (‘the Consultation’). The Consultation asked companies for their opinions on regulations drafted to try and tackle gender inequality in the workplace. The Draft Regulations (‘the Regulations’) will order companies to publish a yearly report on the gap in pay between the genders of its own employees. The Regulations are motivated by the hope that competition and peer pressure will drive employers to tackle any workplace inequalities.
The Consultation sought opinions on several factors relating to the Regulations. For example, the incentive for publishing a report, the method of publication, the cost of publishing a report, and what should be included in “pay” were all considered.
The Regulations are implemented under section 78 and 207 of the Equality Act 2010; section 78 contains the criteria for companies subject to the Regulations.
Coming into force on 1st October 2016, the Regulations will affect companies with 250 or more employees and will concern those employees who are regularly working in the UK with employment contracts subject to UK legislation. While the Consultation considered including relatively smaller companies, the general consensus indicated that it would be unfair to force small businesses to conduct such a complex procedure. It may be the case that, when a review is carried out in approximately 5 years’ time, the Government decides to alter the criteria to include some smaller companies.
What will companies be required to do?
Comparability is crucial. The Government want companies to be able to publicly measure their gender related pay gaps. Therefore, a consistent methodological approach is needed to ensure comparability.
Qualifying companies will be expected to provide a preliminary data snapshot in April 2017; giving them 6 months from the implementation date to prepare. The Regulations set a specific date of 30th April 2017 for employers to take a snapshot of data for a particular pay period. They must then analyse and publish the required information by April 2018 on a date of their choosing. Companies have been allowed to choose their own date to simplify the process. The Consultation concluded that companies should be able to calculate and publish the required information using their existing HR data. By enabling them to choose their own date, the Government has illustrated that it would make sense to choose a date in line with the company’s end of year.
How should companies gather data?
The Regulations require employers to publish overall gender pay gap figures calculated using both mean and the median. The median will be the typical difference as it is unaffected by the small number of very high earners. This will keep the data consistent with data of the Office for National Statistics. The Consultation highlights that including the mean value will be useful within a single organisation as it measures full earnings distribution.
Companies will be required to report on the number of men and women working across salary quartiles. They should calculate the salary quartiles themselves based on their overall pay range. This is intended to illustrate the different ceilings of men and women in employment in a widely understood format.
Companies should note that overtime is not included within the Regulations as it was felt that this would be too reliant on personal circumstances and would not accurately reflect the full time work environment. Bonuses, however, will be included. Companies are required to separately analyse all bonus payments made in a 12 month period and publish the difference between men and women.
Where will the data be published?
As a result of the Consultation, it is believed that the most effective way to make data widely accessible is by using an online platform. Data will be published online, in English and on a searchable UK website accessible to employees and the public. Employers will also be required to send evidence of compliance to a website sponsored by the Government.
The Government will be developing an appropriate package of guidance and support for companies to ensure organisations are familiar with the Regulations and the metrics. Included in the guidance will be details of how to accurately calculate the required data as well as how to comply with any other compulsory requirements.
Companies have approximately 3 months to review their employees’ pay. They may wish to try and reduce any apparent gender pay gap by re-assessing staff pay. This must also be done in line with the relevant employment procedures.
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Harry Taylor was a J B Montagu Scholar at Middle Temple. He was called to the Bar as a non-practicing barrister in 2014. Before joining Helix Law Harry gained commercial experience at a Tax advisory firm. Harry is currently studying for a Masters degree in Employment Law.
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.