You can't please everyone all of the time…..
That's clear from the reaction today following the government's announcement about its proposed legislation requiring employers to publish gender pay gap information from April 2018. The measure is expected to affect around 8,000 employers.
The TUC is critical that there is such a long delay before the requirement is introduced as it had been expected sometime in 2016. The CBI are concerned that league tables should not be used to name and shame employers. Some business groups on the other hand are completely opposed to mandatory gender pay reporting in any form.
According to the Office for National Statistics, the full-time median pay gap is 9.4%. Tackling gender pay has been a priority for the government but an earlier attempt to encourage a voluntary approach to gender pay reporting was unsuccessful. It transpired that only five private sector organisations published the relevant information.
In summer 2015, the government commenced a consultation exercise on implementing the mandatory gender pay gap reporting requirement that is contained in the Equality Act 2010. It also announced, in October 2015, that the requirement would be extended to public sector employers and the required information would also include bonuses. The government has just published its response to the consultation and some draft Regulations for further consultation – the Equality Act 2010 (Gender Pay Gap Information) Regulations 2016. The consultation period ends on 11 March and the government's response to this second consultation is expected in the summer.
What are the key points of the proposed Regulations?
- The Regulations are expected to come into force on 1 October 2016.
- They will apply to private and voluntary sector employers with at least 250 employees (there will be a separate consultation exercise in relation to the public sector).
- Employers will need to calculate gender pay gaps using data from a specific pay period every April, and the specified relevant date is from 30 April 2017.
- Employers will then be required to publish information for the first time about their gender pay gaps within 12 months, that is in April 2018, and thereafter annually.
- Employers must publish this information in English on their searchable UK website that is accessible to both their employees and members of the public and must keep this information online for three years. In addition, the information must be uploaded to a government-sponsored website.
- A written statement confirming that the information is accurate must accompany the required information.
It is important to consider in more detail what is meant by "pay" and how the calculation will be carried out.
Pay includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay including car allowances, on-call and standby allowances, clothing, first aider or fire warden allowances.
Pay does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.
As for the calculation, the Regulations require employers to publish their overall mean and median gender pay gaps for the specific pay period mentioned above. Using both figures gives a more complete picture. As the government explained, the mean calculation is useful because women are often over-represented at the low earning extremes and men over-represent the high earning extremes. However, using the median figure, that of the middle earner, is the best representation of the typical difference between the two groups.
Significantly, following the government announcement in October 2015, employers will also have to publish the difference between mean bonus payments paid to men and women and the proportion of male and female employees that have received a bonus.
But that's not all. Employers will also be required to report on the number of men and women in each quartile of their pay distribution. What this means is that employers will calculate four salary quartiles based on their overall pay range and then identify how many women and men are in each quartile.
The government does not intend to introduce any civil penalties for non-compliance at the moment but does intend to "closely monitor" levels of compliance with the Regulations during the initial years. Within five years the Regulations will be reviewed by the Secretary of State to establish their effectiveness.
The good news is that guidance for employers will be published this year and on the face of it, there appears to be sufficient lead-in time for employers to collate the relevant information to calculate gender pay gaps. On the other hand, large organisations that may not have carried out any assessment of gender pay information to date may be concerned about how to start the process and concerned about what they might find.
Blake Morgan can assist you in carrying out gender pay audits and see below for more details.
South Coast: David G Miles, HR Consultant
Wales: Ian Jones, Senior Associate