The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (GPG Regs) were published on 6 December 2016. Non-Statutory guidance is still being developed by the Government together with ACAS and should be available shortly.
The key points to note from the final draft GPG Regs are as follows:
• Commencement: The GPG Regs did not come into force in October 2016 as previously planned and are now scheduled to commence in April 2017. This makes no material difference however, as the first gender pay gap report (due in April 2018) was always intended to be based on pay data collected in April 2017.
• “Snapshot” date: The “snapshot” date for collection of the pay data is now 5 April every year and not 30 April as previously stated in the draft GPG Regs. This is intended to avoid the need for employers to collate information from two tax years. The gender pay gap report must be published within 12 months of the “snapshot” date so the first report must be published by 4 April 2018 and then by 4 April every subsequent year. The date for publication of the report was previously 29 April.
• Group companies: The Government looked at the request of many businesses to allow group companies to report on an aggregate basis, rather than by single entity, but this was rejected. The reporting requirements will therefore still apply to each separate legal entity with at least 250 employees within a group structure.
• Casual workers: The wider definition of “employment” found in the Equality Act 2010 is to apply to the term “Relevant Employee” under the GPG Regs. This means that casual workers and bank staff who are engaged directly by a relevant employer will fall within the scope of the GPG Regs. This will include workers engaged under an umbrella contract or a zero-hours contract. Freelancers and consultants are also likely to come within scope if they are engaged under a contract that obliges them to perform the work personally, for and under the direction of another person.
Collating pay data for consultants and contractors is likely to be more difficult for employers from a practical perspective as those people won’t be on payroll and therefore their pay information is unlikely to be centrally stored. The Government has acknowledged this and the final draft of the GPG Regs contain an exclusion for contractors for whom the employer does not have, and it is not reasonably practicable for them to obtain, the relevant data. This leaves scope for an argument about what “reasonably practicable” means but the non-statutory guidance is expected to clarify this.
• Meaning of “Pay”: Earlier drafts of the GPG Regs had included maternity pay and sick pay (the amounts actually received by employees) in the definition of “pay”. However, the final draft of the GPG Regs introduces the term “full pay relevant employee”, which excludes from the reporting requirements any employees on reduced pay as a result of being on sick leave, maternity leave, or any other type of family leave. Such employees will however still count towards the 250 threshold. Where contractual sick pay or maternity pay policies apply and on 5 April employees are in receipt of full pay under those policies, those employees should be included. The Government considered this approach would be easier to implement and would achieve a more meaningful earnings comparison. However, the same adjustment has not been made for bonus data or pay quartiles so the results may still appear skewed by employees on temporarily reduced rates of pay.
• Meaning of “Bonus pay”: “Bonus” was already defined widely to include commission and securities but it was unclear how these were to be calculated because the draft GPG Regs referred to bonus payments that were “received and earned” in the relevant period. Bonus pay in the form of shares etc will now be deemed to be paid to the employee at the time, and in the amount in respect of which, it gives rise to taxable earnings income. This should mean that any deferred element of bonus pay will not count for the purposes of calculating the gender pay gap. The extent to which any non-cash awards will count towards the employer's gender pay gap will depend on the type of security and whether and when any income is deemed taxable. It is expected that further information on how to comply with the reporting requirements for bonuses will be provided in the non-statutory guidance.
• Median bonus: It will also now be necessary to publish a median as well as a mean gender bonus gap figure, whereas previously, only the mean was required. This has brought bonus reporting into line with the requirement to provide mean and median gender pay gap figures.
• Explanatory narrative: The Government’s response to the GPG Regs consultation confirms that the provision of a narrative accompanying the basic gender pay gap information will be strongly encouraged in the guidance, as we had already anticipated. The narrative will allow employers to provide a context for their published figures, explain any pay gaps and outline what actions it will take to help narrow those gaps.
• Public sector: The Government’s stated intention is still to introduce the same reporting obligations on public sector employers as apply to private and voluntary sector employers and within the same timeframe, i.e. by April 2017.