Which employers will need to report?
All British employers with 250 or more employees need to comply with the new reporting obligations. There is no explicit definition in the regulations, but it seems clear that the extended definition of employment in the Equality Act 2010 will apply. That means that workers as well as employees in the strict sense count towards the threshold and need to be included in the figures reported.
For technical legal reasons there are two different sets of regulations which set out substantially the same requirements. Commercial organisations and charities will be subject to the gender pay gap regulations.
For English public sector organisations (including most HE institutions) these requirements have been combined with other equality reporting requirements in revised specific equality duties regulations. Devolved authorities in Wales and Scotland are already subject to gender pay reporting requirements.
What needs to be reported and when?
Employers will need to publish the following sets of data, calculated as at the relevant “snapshot date”, starting in 2017:
- The gender difference in mean and in median hourly pay
- The gender difference in mean and in median bonus pay during the 12 months prior to the snapshot date
- The proportion of male and female employees who received bonus pay during that period
- The proportion of male and female employees according to quartile pay bands.
The snapshot date is 5 April for the private sector and charities, and 31 March for public authorities. That means that the deadline for the publication of the first set of data will either be 4 April or 30 March 2018, depending on the type of employer – ie, a year after the first data snapshot date.
Broadly speaking pay is the gross hourly pay for normal working hours during the relevant pay period, excluding overtime but including allowances and bonuses attributable to that pay period. There are complex rules for working this out. They have a lot in common with the rules on calculating a week’s pay for employment protection purposes, although the focus is on constructing representative hourly rather than weekly gross pay.
Employees who are not on full pay because they are on leave for any reason during the relevant pay period should be excluded from the gross hourly pay figures.
Bonus pay is not to be calculated on the basis of an hourly rate, but using a cumulative annual figure including not only cash bonuses but any taxable earnings attributable to awards under share schemes and long-term incentive plans, which have accrued in the relevant period.
Will employers have to provide an explanation of any pay gap?
No. Employers will be encouraged, but not obliged, to provide a commentary on the figures. In its response to consultation on the private sector regulations the Government suggests that, where relevant, “employers may wish to provide detail of the initiatives they have implemented to recruit more women or strengthen their female talent pipeline.” Guidance published by ACAS and endorsed by the Government Equalities Office suggests that, having published their figures, employers should “initiate an action plan that aims to reduce the gender pay gap in their workforce”. For public authorities, sector-based guidance may well be relevant.
Employers will need to find the right balance. In some male-dominated sectors like manufacturing and engineering, the pay gap may be explained by low female participation. In others, where the difference in pay may not have an obvious explanation, an employer will need to think carefully as to what commentary it provides. Certainly it would be wise to obtain legal advice before offering any public analysis of the reasons for any gender pay gap and any steps being taken to address it.
Where must the information be published?
The employer must publish the relevant data on its website and keep it there for at least three years. Employers will also be obliged to upload it onto a website specified by the Government. For private sector organisations and charities the data must be accompanied by a written statement confirming its accuracy, though this requirement does not apply in the public sector.
What are the penalties for non-compliance?
The private sector regulations do not set out any civil or criminal penalties for non-compliance, though this is to be kept under review. The Government has indicated that in its view failure to comply will be an “unlawful act” which would enable the Equality and Human Rights Commission to take enforcement action.
The position is different in the public sector, since the gender pay reporting obligations have been framed as part of the specific equality duties imposed on public authorities under the Equality Act. The Equality and Human Rights Commission has been granted express powers to issue compliance notices for breaches of these requirements.
In reality, however, compliance is likely to be primarily driven by the risk of reputational damage. As well as plans for highlighting examples of best practice, there are plans to “name and shame” organisations which fail to comply.
How can I find out more?
The relevant regulations, read together with the Guidance, will answer most common questions about how the data should be compiled and the way an employer could approach a supporting narrative. There are however a number of more detailed points that the regulations do not completely resolve, as well associated legal risks when publishing any narrative or action plan, so please contact us if you would like to explore any of these issues.