With a report launched looking into the way gender pay is reported, David Whincup, Partner and Head of the London Employment Team, Squire Patton Boggs discusses what this will mean for finance directors?
Government launches gender pay gap consultation Earlier this month, the Government launched a consultation on regulations that would require private and voluntary sector businesses with at least 250 employees in Great Britain to publish information on their gender pay gap. A gender pay report shows the difference between the average earnings of men and women as a percentage of men’s earnings. According to the Office for National Statistics, the current overall UK gender pay gap of 19.1% reflects the fact that a woman, on average, earns around 80p for every £1 earned by a man.
The thinking behind the proposal is to achieve greater pay parity through (a) the mere fact of requiring employers to think about the topic and (b) sheer embarrassment. Publishing data showing a whopping gender pay gap will constitute compliance with the new regulations, the “sting” being in the use which may be made of those statistics in individual and collective equal pay claims and even on social media in for general brand management terms.
The existence of a reported gender discrepancy in pay across an employer does not of itself mean that there is any pay discrimination – it may instead be a function of who holds the more senior roles, who works part-time, etc. The issue will be where there are material gaps within specific roles or grades, hence the enquiry in the consultation as to whether reporting at that level of detail would be feasible for most employers. Detailed reporting requirements would be a material administrative burden for employers but a far more useful measure of progress than the very blunt instrument of flat figures across the whole business. Whatever level of detail the required disclosure ultimately seeks, however, it will leave untouched all the various defences open to employers to justify pay differentials between individuals or groups. It should be stressed that this new regime will not make unlawful any pay arrangements that are currently legitimate.
The power to make the necessary regulations is already contained in Section 78 of the Equality Act 2010 but that provision has never been triggered. The Government had hoped previously (but vainly) that companies would report voluntarily. Although its 2011 Think, Act, Report voluntary reporting code attracted a number of household-name sign-ups, it is thought that only a handful have actually released pay gap data. It therefore seems apparent that if there is to be widespread reporting of gender pay, it will have to be mandatory. The Small Business, Enterprise and Employment Act 2015 requires the new regulations to be made (but not necessarily in force – see below) by the end of March 2016. The consultation – which closes on 6 September - seeks views on:
- Where employers should publish their gender pay information, e.g. their public website; •
- The ability of employers to calculate differences in the pay of male and female employees, e.g. being able to calculate the difference between the earnings of men and women as a percentage of men’s earnings and to break down gender pay gap figures by full-time and part-time employees, grade or job type
- The frequency of reporting (which will be no less than every 12 months);
- The cut-off periods for calculation of the gender pay gap. The Government has suggested 1 January, 6 April or 1 October as possible cut-off periods;
- When the regulations should come into force. The Government has raised the possibility of a phased introduction, with employers with 500 employees upwards being required to publish the information earlier than those with 250 employees
- Whether the proposed threshold of 250 employees is appropriate, bearing in mind that though this represents less than 2% of employers by number, it would still cover over 10 million people across the UK;
- Whether civil enforcement procedures are required to ensure compliance with the proposed regulations and if so, what form these should take.
Although the Government expects to make the required regulations during the first half of 2016, it intends to delay implementation for an appropriate period (yet to be confirmed) to give businesses an opportunity to “prepare”. This may include both setting up the systems necessary and perhaps some last-minute tweaking of pay scales! In the meantime, employers likely to be affected by the reporting requirement should:
- Review pay practices and rates to identify and understand any differentials that may exist either between or within grades;
- Identify potential risk areas within the business;
- Consider whether the internal infrastructure is in place to comply with the pay reporting requirement;