Mind the gap, please

The Government’s new 'Think, Act, Report' publication, entitled "Trailblazing Transparency: Mending the Gap", sets the scene for the huge legislative changes we will see in the gender pay gap reporting arena this year. Whilst the report stresses the business benefits to employers who voluntarily publish and tackle their gender pay gaps, new regulations will soon force employers to go public with their gender pay gaps.

On 12th February 2016, the government commenced a second consultation (consultation closes on 11 March 2016) and draft regulations which, when implemented (expected to be October 2016), will force employers with 250 or more employees to publish statistics about their British workforce, demonstrating the gender pay gap.

In 2014 the numbers of men and women in employment were broadly comparable (13.2 million male employees and 12.9 million female employees).  The gender pay gap for all employees was estimated to be a staggering 19.1%. However, a much higher proportion of women work part-time (12% of male employees and 41% of female employees). When broken down by hours, the UK’s gender pay gap is actually more like 9.4% for full-time employees and -5.5% for part-time employees. This means that women working part time are in fact, paid more than their male equivalents on average. Surprising isn’t it?

The reason why the UK’s overall gender pay gap stands at 19.1% is because there is a far higher proportion of women performing part-time work (which is typically much lower paid at an average of £8.44 per hour) against the average of £13.59 per hour for a full time male employee. It is this that has a significant impact on the overall gender pay gap figure.

When the regulations come into force employers will have to publish:

• the mean and median overall gender pay gap figures for their organisations;
• the bonus pay gender pay gap for bonus payments made over the preceding 12 months; and
• the number of men and women working across their salary quartiles.

Employers will have to report in a way that mirrors the Office for National Statistics’ methodology for calculating ‘pay’ at the relevant snapshot date. This includes publishing information on basic salary, shift premium, bonuses and other elements such as allowances. However, because of the distorting effect it can have on the statistics, employers can ignore overtime pay.

To help explain any pay gaps they may have, employers will also be able to include additional narrative that provides context and sets out any actions the employer intends taking.

International employers will be pleased to know that the legislation is intended to capture just the British workforce – the draft Regulations will apply to employees who ordinarily work in Great Britain and whose contracts of employment are governed by UK legislation.

What does this mean for you or your business?

When the regulations come in to force, employers with 250 or more employees will have to publish their gender pay gap statistics on their UK website, and keep it available for at least 3 years.

Employers will also have to upload the information to the Government website which will also monitor compliance. Press reports suggest that the Government may use these uploads to publish league tables, raising concerns that this might result in naming and shaming of those with large gender pay gaps (as we are seeing with National Minimum wage breaches by employers).

What do you need to be doing now?

Employers should familiarise themselves with the regulations and identify whom within their business will produce the information needed. 

Although the first reporting deadline is some time away, it is advisable for employers to act now and begin gathering data and calculating the figures. This will allow businesses to understand what they are dealing with and consider what remedial steps to put in place now in order to reduce the gap by the reporting deadline. Some employers are taking the view that early compliance can be good for staff relations.   

If you employ 250 employees or more, be aware of the timeframes under the regulations.  They are:

1st October 2016 – Regulations expected to come into force.

30th April 2017 – first pay data ‘snapshot’ should be compiled by employers.

30th April 2018 – the longstop date to publish first gender pay gap statistics.

Some commentators have suggested that implementation may be delayed or staggered to give businesses time to prepare for the new regime. Let’s see.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.