Gender pay gap reporting for employers

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Larger commercial organisations and charities will need to grapple with new rules on the publication of gender pay information, which are likely to come into effect next year.

Larger commercial organisations and charities will need to grapple with new rules on the publication of gender pay information, which are likely to come into effect next year.

Background

Public sector organisations are already subject to a range of duties that oblige them to publish equality data, but until recently there were no plans to impose any diversity reporting requirements on other large organisations, despite the persistence of the gender pay gap.

The Equality Act 2010, which became law shortly before the Coalition Government came to power, includes a power to make regulations about gender pay transparency for private and third sector organisations with at least 250 staff. However this is one of the relatively few provisions in the Act which has not yet been brought into force.

Instead the Coalition Government preferred to concentrate on voluntary initiatives to help reduce the gender pay gap, most notably “Think, Act, Report”, which recently reached its third anniversary. However, under pressure in the House of Lords earlier this year, the Coalition Government finally conceded an amendment to the Small Business Enterprise and Employment Bill shortly before it became law. This had the effect of resurrecting the long-buried provisions on gender pay transparency in the Equality Act.

The new Conservative Government has now launched a consultation on how and when these new compulsory reporting requirements should be implemented. Consultation closes on 6 September 2015. Regulations setting out the detailed requirements are due to be published during the first half of 2016, with implementation likely later in the year.

What information?

The consultation mentions three options. The first, and simplest, option would be to require employers to publish a single gender pay gap figure – ie, the percentage by which average (or possibly median) female earnings fall short of average male earnings. However, as the consultation points out, this does not offer the “level of granularity” to explain pay differences within an organisation.

Two additional measures that might help are explored. The first would involve calculating separate gender pay gap figures for full-time and part-time staff. That would reflect the way the national figures are compiled, which currently show a gap of 9.4 per cent for full time staff, but just over 19 per cent when part-time workers are also included.

The second – which would break down average earnings by gender and grade of job type – is likely to be more informative, but carries a number of risks for employers. Where there are relatively few post-holders at each level there will be concerns about individual and commercial confidentiality. Employers will also worry that such data could provide valuable information for employees wishing to bring equal pay claims, though it can normally be obtained as part of the ligation process in any event.

The consultation anticipates that many employers will want to provide some contextual narrative to explain the figures. After all, the mere fact that there is a gender pay gap does not mean an employer will be in breach of the equal pay legislation. Many employers will wish to offer an explanation for the pay differentials which are not linked to sex discrimination. The government is currently undecided about whether the provision of additional information will be mandatory or whether it should be set out in non-statutory guidance.

Implementation timetable

The consultation proposes that commencement of the regulations should be delayed for an “appropriate period” after their publication in the first half of 2016. While it does not ask for views about when the regulations should be brought into effect, it is clear that phased implementation, with the largest employers going first, is one option being considered. The consultation does, however, explore employers’ preferred options for the cut-off date for the preparation of the pay gap figures and the frequency with which they should be published.

Action required

The lull before the publication of the regulations next year may be a good time to interrogate the data that payroll providers are currently able to supply and talk to them about what steps they are planning to take in advance of this new legislation. The Think Act Report framework has some useful examples of the various metrics that can be adopted.

If these preliminary steps reveal that your organisation could be at risk of equal pay claims, it would be wise to take legal advice before going any further.

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