Gender pay reporting – time to act
Employers are being advised to take early action ahead of new legislation requiring them to publish information about their gender pay gap. James Simpson, Partner at law firm Blake Morgan LLP, advises that reviewing the figures now will give employers the vital chance to put right any unjustifiable differences, maintain a good reputation and be one step ahead in recruiting new talent.
Although the UK has had equal pay laws for more than 40 years, the gender pay gap remains at an overall figure of 19.1%, meaning that a woman, on average, earns around 80p for every £1 earned by a man.
Various attempts have been made to reduce the gap, with the public sector historically at the forefront. In April 2011, the Public Sector Equality Duty (PSED) imposed a duty to publish certain equality information, but in the private sector, voluntary reporting campaigns reflected a reluctance to legislate. 280 businesses signed up to the 'Think, Act, Report' initiative, but only a handful actually published information. In 2015, the Government pledged to implement compulsory equal pay reporting for employers with at least 250 employees.
The draft legislation now gives businesses a concrete idea of the requirements, which will come into force in October. Although the first reports will not be required until April 2018, they will involve a snapshot of gender pay differences in April 2017, and information regarding bonus payments for the 12 months beginning this May (2016).
What will be the impact?
Once in force, employers with 250 or more employees (and 'employees' may cover, for example, some contractors and LLP members under a 'contract personally to do work') will be required to publish, annually on their website, information about:
- the differences in average pay between men and women,
- the differences in average bonus pay (including commission),
- the proportions of men and women receiving bonuses and
- the number of men and women in each quartile of their pay distribution.
As with the PSED, transparency and accountability is expected to drive a change in behaviour. Employees, interest groups and the media may all look at the figures and make comparisons. There are suggestions of "league tables" to publicise the best and worst performers.
Potential "naming and shaming" risks damage to hard won reputations, the prospect of poorly performing employers facing litigation, and problems doing business with the public sector in procurement processes. High value equal pay claims are no longer just an issue for the public sector.
What should businesses do?
Dealing with gender pay differences is an issue for all businesses, and the Government has indicated that it will review the 250+ threshold in 5 years. Clearly, addressing any problems is not possible overnight. It requires a careful analysis and if necessary, a plan to phase in appropriate changes.
We recommend that businesses consider undertaking an equal pay audit well in advance of the 'snapshot' period of April 2017, particularly since bonus payments will be assessed from May 2016. This will evaluate the risk, giving time to address any problems prior to compulsory publication. Businesses planning budgets for their next financial year need to know now what costs, if any, might be associated with this prior to April 2017 – and prior to May 2016 in the case of bonuses.
As well as ensuring compliance, an audit would:
- identify and explain any justifiable differences
- eliminate inequalities and provide evidential support for rational, fair and transparent pay
- demonstrate commitment to fairness and equality – an important factor in attracting new talent.
At Blake Morgan, we have years of experience helping employers with equal pay, discrimination, audits and compliance. By tackling the issues through us, you will benefit from 'legal advice privilege', protecting documents and communications from disclosure in legal proceedings (not available to other organisations such as accountants, independent HR consultants or insurance companies).
We are running a series of events and round table discussions. For further information please email firstname.lastname@example.org
If you have any queries on the forthcoming gender pay legislation and how it might affect your business please contact our employment team.