Introduction of mandatory reporting on gender pay gaps

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According to the Office for National Statistics’ Annual Survey of Hours and Earnings 2014, the gender pay gap has narrowed to 9.4% compared with 10.0% in 2013. Last year’s figure represents a significant fall from 17.4% in 1997. So it’s good news? Perhaps not when you bear in mind that the Equal Pay Act dates back to 1970 and was introduced to prevent women being paid less than men because of their sex.

It was almost five years ago that the Equality Act 2010 came into force. Section 78 included a provision whereby the government could introduce regulations requiring private sector employers with 250 or more employees to report gender pay gap information. Mandatory gender pay reporting was controversial and no such regulations were ever introduced. The government’s preference was for organisations to take a voluntary approach to assess pay levels rather than be compelled to carry out gender pay audits. As a result, in 2011 the Government Equalities Office launched the Think, Act, Report scheme. This is a voluntary, equality reporting initiative the aim of which is to improve transparency on pay.  Unfortunately, while around 275 employers signed up to the scheme it is reported that only five of these published details of the gender pay gaps in their organisations.

Clearly, the voluntary approach has not worked. Although the gap between gender pay rates is narrowing slowly, it is still a significant concern. In fact, according to the ONS, the gender pay gap in the private sector for  2014 was 17.5%  (a fall from 19.2% the previous year).

The Labour party and Liberal Democrats made it clear that they wanted mandatory gender pay gap reporting to be introduced to help narrow the gender pay gap more quickly in the years ahead. The Small Business, Enterprise and Employment Act 2015 was passed on 26 March 2015. As a result of a late amendment, the Act requires regulations under section 78 to be made within 12 months of the Act coming into force.

So what does this mean for employers?

At this stage, we do not have details of what the regulations may contain but from previous announcements and the provisions of section 78 itself we can expect the following:

  • The regulations will apply to private sector organisations with 250 or more employees and such organisations employ around 10 million people in the UK
  • It is expected that firms will need to report annually and failure to do so could result in a proposed fine of £5,000 for non-compliance
  • The government has indicated that organisations will need to look at the hourly rate of pay for each employee by gender, the differences between men and women’s starting salaries, the difference between average basic pay and total average earnings of men and women broken down by grade and job title
  • Organisations will then need to publish their full-time and part-time gender pay gap and overall gender pay gap.

Many organisations will be confident that their pay arrangements will pass such scrutiny and will have no concerns about mandatory gender pay reporting. Others organisations will be concerned that a mandatory audit will reveal long-standing and ongoing gender pay differences.

The Employment team at Blake Morgan can help you with an equal pay audit and can support you in reviewing current pay structures, policies and incentives. Our team comprising experienced solicitors and HR professionals has significant experience of helping employers in both the public and private sector in these areas, as well as defending Equal Pay claims involving single or multiple claimants. We provide an exceptional service that is totally confidential and also covered by legal professional privilege.

Please contact James Simpson or David Miles for further information about how we can help you.