Gender pay gap reporting
Friday 7th July 2017
The Equality Act 2010 (Gender Pay Gap Reporting Information) Regulations 2017 require all private and voluntary sector employers with 250 or more relevant employees to report on the difference in pay (including bonus) between men and women.
Employers will need to publish their first gender pay gap reports by 4 April 2018, based on hourly rates of pay as at 5 April 2017 and bonuses paid between 6 April 2016 and 5 April 2017.
A relevant employee is “a person who is employed by the employer on the relevant snapshot date”. The snapshot date is 5 April in the relevant year.
Employment has the Equality Act 2010 meaning and therefore includes many self-employed workers contracted directly to provide services. However, agency workers, partners or those providing services via their own service company are not included.
Each part-time worker counts as one employee. This is an important point for employers who evaluate employee numbers by using full-time equivalents where two part-time employees might be considered as one employee.
Only “full-pay” relevant employees are counted in gender pay gap calculations,not those being paid at a reduced or nil rate due to, for example, maternity or shared parental leave.
The 6 calculations, expressed as a percentage
1) Average gender pay gap as a mean average
2) Average gender pay gap as a median average
3) Proportion of men and women in each quartile pay band
4) Average bonus gender pay gap as a mean average
5) Average bonus gender pay gap as a median average
6) Proportion of men and women receiving a bonus payment
When calculating the hourly rate of pay, all ordinary pay and bonus pay (pro-rated where bonus is paid in respect of a longer period) received in the relevant pay period (being the pay period within which 5 April falls) is included. The pay period may be as long as a year where payment is irregular.
Ordinary pay includes basic pay, allowances, pay for piecework, pay for leave and shift premium pay. It only includes monetary payments and excludes overtime, benefits in kind and salary sacrifice schemes.
Bonus pay includes anything that relates to profit sharing, productivity, performance, incentive and commission, received in the form of cash, vouchers, shares, bonds, debentures, futures, securities, securities options and interests in securities. However, bonuses paid in the form of, for example, securities, are only to be included at the point in time when they give rise to taxable earnings or taxable specific income.
A positive percentage result means that overall female full-pay employees have lower pay.
What information must be published?
The results of the 6 calculations outlined above must be published on the employer’s website in a manner accessible to employees and the public for 3 years and on a Government website. The results must be confirmed in a written statement by an appropriate person, such as a director.
Employers have the option to provide a narrative with their statement and calculations. The narrative is an opportunity to explain the reasons for the results. A gender pay gap does not necessarily mean that an employer has acted in a discriminatory way, but an explanation may be needed. It is also an opportunity to give details about actions that are being or will be taken to reduce or eliminate the gender pay gap and how long it is likely to take before improvement.
Penalties for non-compliance
There are no specific penalties for non-compliance, but failure to comply is unlawful and there is a risk of reputational damage and adverse publicity. Those organisations failing to comply are likely to find themselves under pressure from unions and others campaigning for equality. The EHRC may also decide to investigate.
Actions for employers
To ensure effective gender monitoring within an organisation, it is essential to collate a variety of data which can be continually evaluated to ensure that problems are identified quickly and addressed immediately. Carrying out reviews of current pay practices/policies will help identify potential risk areas. Such reviews should consider whether differences exist on a departmental or geographical basis. Ensuring there is one transparent system across an organisation which uses objective criteria will help minimise risk. Data should be collated to allow a review of starting salaries, application/promotion rates, retention rates and differences between part-time and full-time employees.
An action plan should be prepared to address any problems identified and a communications plan prepared to help explain the data and respond to questions. There may need to be greater focus on female recruitment and retention, including a review of the effectiveness of family friendly policies, increased training on gender issues for line managers and those involved in recruitment, promotion and remuneration.
All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.