Gender pay gap reporting


Author: Mike Tremeer


The gender pay gap (i.e. the difference in pay received by women compared to men) has been monitored by the Office for National Statistics since 1997.  The 2016 results showed that women who worked full time were paid 9.4% less on average than their male counterparts.  The overall gender pay gap was 18.1% – though this reflects the fact that a greater proportion of women work part time compared to men.  The 2016 figures were the lowest since records began but, whilst progress is being made, many would argue that it is not enough.

In an effort to tackle the historic inequality between male and female pay, section 78 of the Equality Act 2010 gave the Government the power to make regulations that require employers to publish data regarding the gender pay gap within their business.  Between 2010 and 2015, the Coalition Government did not make use of this power.  However, it has now been exercised and the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (GPG Regulations) came into force on 6 April 2017.

The GPG Regulations apply to many large employers in the UK and will require them to collate and publish figures showing the differences in pay for male and female employees in their businesses.  It is hoped that this “naming and shaming” approach will lead to businesses taking this issue seriously and addressing anomalies within their own organisations.

Who is affected?

Any private or voluntary sector employer which has 250 or more employees on 5 April each year will be required to publish pay figures on or before 4 April the following year.  So any affected company which had 250 or more employees on 5 April 2017 must publish the data on or before 4 April 2018.

The definition of who is an employee for the purposes of calculating whether the business has 250 or more is wide.  It includes anyone employed under a contract of service, a contract of apprenticeship or a contract personally to do work – and so will include employees, casual workers and some temporary or short term workers.  It is also expressly stated to include “partners, where they would usually be considered employees”.  However, those salaried partners or LLP members who are treated as employees for payroll purposes are not considered a “relevant employee” by the GPG Regulations, and so they need not be included in the various calculations that are required and referred to below.

Each group company is considered a different entity for these purposes – and so will only be subject to the reporting obligations if it employs at least 250 employees on the relevant “snapshot” date.  Group headcounts are not relevant.

Contents of the report

Affected employers must publish:

  • mean and median gender pay gap figures based on average hourly pay.  The use of a median figure is intended to avoid the results being distorted by a small pool of individuals that receive very high or very low pay;
  • the percentage of male and female employees in each quartile of the employer’s overall pay range – intended to expose any disproportionate distribution of the sexes on the company’s pay scale;
  • the difference between the mean and median bonus pay for men and women over a 12 month period; and
  • the proportion of male and female employees that received a bonus over a 12 month period.

The report must also include a written statement signed by a director or equivalent confirming that the data published is accurate.  It must be published on the employer’s own website and a government website and remain publicly available for a period of three years.

What is pay and how should it be calculated?

For the purposes of the GPG Regulations, pay includes basic pay, bonuses, allowances (such as on-call and standby allowances), pay for leave (only if fully paid – for example, holiday pay) and shift premiums.  It excludes overtime pay, expenses, benefits in kind and the value of any sacrifice schemes.

Ordinary pay and bonus pay should be calculated using gross figures over the employer’s usual pay period that includes the 5 April snapshot date each year.  For those employers that process payroll on a monthly basis, the payments to be used are therefore likely to be those that are made to employees in the April of each year.

Sanctions for breach

Unusually, the GPG Regulations do not set out any material sanctions for breaching the obligations.  Instead the Government has indicated that it will run periodic checks to assess for non-compliance, will produce tables by sector of employers’ reported gender pay gaps and will highlight and identify employers who publish particularly full and explanatory information.  In addition, the Equality and Human Rights Commission do have some powers to investigate and to issue non-compliance notices if necessary.

It remains to be seen, therefore, how severe the consequences of non-compliance will be.  Given that it has taken the Government more than five years to implement the reporting regime at all, it was perhaps to be expected that the sanctions for breach would not be significant in the early years.  Expect that position to change in the next two to three years if employers do not embrace their reporting obligations.

Preparing for the new regime

Gender pay gap reporting has the potential to cause significant administrative headaches for finance and HR departments when collating and calculating the figures, but also considerable employee relations issues if the results evidence material differences in pay for male and female employees.  It is even possible that the published report could lead to adverse publicity if a curious journalist or disgruntled employee chooses to highlight anything that could have damaging effects.

Employers that are affected by the reporting obligations would therefore be well advised to:

  1. review the guidance that has been published by ACAS in relation to their reporting obligations in order to understand these fully;
  2. review the timing of bonus and commission payments that are made to relevant employees.  If some employees receive such payments in or around April each year, but others do not, that risks distorting the figures that must be reported;
  3. carry out the preliminary calculations in advance of the date for publication.  If the data highlights results that are unfavourable, it is better to understand that early in order to establish the reasons for it,  to consider what accompanying notes can be provided and what the business plans to do about it; and
  4. consider who among their senior management will be ultimately responsible for the data and for signing the required statement of accuracy.

Mike Tremeer, Senior Associate, Fladgate LLP (mtremeer@fladgate.com)

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