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On 1 October 2016, it is anticipated that regulations will come into force in the UK which will require many employers to provide information about employees’ pay with reference to their gender. The deadline for the first gender pay report is expected to be 29 April 2018 but this must be based on a snapshot of a company’s workforce taken as at 30 April 2017. With not much time to go it’s important to understand now what you should be doing to prepare for the new regime and to ensure that you are ready to report on time and in a way which promotes and protects your business.

Consultation on the Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 has now closed and the responses to that consultation together with the final version of the regulations and accompanying guidance are due to be published this Summer. The information below is based on the draft regulations currently available.

Reporting Requirements
Private and voluntary sector employers with 250 or more employees will be required to publish an annual gender pay gap report outlining the following information:

• The difference (expressed as a percentage) between the mean and median gross pay for male and female employees in the organisation.
• The number of men and women in each of four pay bands (quartiles), based on the employer’s overall pay range.
• The difference (expressed as a percentage) between the mean bonus pay received by male employees and that received by female employees over a 12-month period.
• The proportion of men and women who received a bonus in the same 12-month period.

Employers are not obliged to provide an explanation of their statistics. Most employers are, however, likely to want to provide at least some information explaining any pay gaps (e.g. the proportion of women in part-time work compared with men, analysis of pay gaps by role and seniority, etc.) They may also want to set out what action (if any) they plan to take to close any pay gap. The provision of a narrative is likely to be strongly encouraged in the guidance to the regulations.

Timing and publication

Employers are required to report on a “snapshot” of pay taken each April, starting on 30 April 2017 (for the first reporting deadline of 29 April 2018). For bonuses, in order to capture different bonus practices across companies and within companies themselves, employers must include in the calculation of the bonus pay gap all bonuses paid in the 12-month period running up to the relevant “snapshot” date. For the reporting deadline of April 2018, that means all bonuses paid between 1 May 2016 and 30 April 2017.

The report must be published on the organisation’s own website and must be kept online and publicly available for 3 years. It will also be necessary to upload information to a government-sponsored website.
Hopefully the government will provide additional information on how to approach these issues in the guidance due out in the summer. But these points also flag the importance of carrying out a proper analysis of gender pay and bonus statistics, and including an explanatory narrative in an employer’s report.

Enforcement

There is currently no indication that the Government intends to take criminal or civil action against employers who don’t publish a report or who publish a non-compliant report and one criticism of the regulations is that they contain no sanctions for non-compliant employers. However, the Government has stated it will monitor compliance and publish its own reports analysing gender pay gaps by sector. It has also said it might publicly identify those employers who have not complied.

As well as potential “naming and shaming” of non-compliant employers, significant pay gaps could damage the reputation of an organisation and impact its ability to retain customers. It also remains to be seen whether the threat of negative publicity will be a sufficient motivator for employers to improve their recruitment, pay, promotion, flexible working and family-friendly practices. This may depend on whether the publication of gender pay gap figures begins to have an impact on an organisation’s ability to recruit female candidates. Of course, the preparation of sector-based tables will allow applicants to seek out the employers with the smallest gender pay gap.

Employers should also be wary about gender pay gaps which could affect staff morale or lead existing employees to bring grievances and/or claims for sex discrimination and equal pay.

Points requiring clarification

Meaning of “pay”
The definition in the regulations is not exhaustive so something more definitive would be welcome but “Pay” currently includes most types of remuneration paid through payroll. There is a helpful guide below:

Included in “pay”: Bonuses, shift premiums, on call and standby allowances, car allowance, maternity pay, sick pay.

Not included in "pay": Overtime, expenses, benefits in kind, redundancy pay, value of salary sacrifice schemes.

Pay means pay actually received rather than pay an employee would otherwise have been entitled to receive, but for reasons such as sick leave or maternity. As most women will receive significantly lower or no pay for at least some of their maternity leave this has created some concern that where several women in an organisation are on maternity leave, the gender pay gap may appear to be larger than it, in fact, is.

Another concern relates to bonuses because including bonus pay in the definition of pay means it may well be double-counted since bonuses paid in April will need to be included in both pay and bonus gap figures. Where large annual bonuses are paid in April to a proportion of staff, this may have a significant impact on the gender pay gap. It is hoped that uncertainties around pay and bonuses will be clarified in the final regulations.

Group companies
Group companies are not currently required to aggregate employees across different subsidiaries. However, if a group company has several entities with more than 250 employees then at present it will have to produce several gender pay gap reports. Businesses have expressed concern about the administrative burden of this approach and the Government are reviewing the issue.

Casual workers
It is not yet clear whether pay information will need to be provided for casual workers such as bank staff and those on zero hours contracts. It is anticipated that this will be the case but we hope that this will be clarified in the Government’s guidance yet to be published.

Preparing for the new regime

  • Is your organisation likely to be required to report on gender pay – is it in the private or voluntary sector and will it have 250 or more employees on 30 April 2017 (the first “snapshot” date)?
  • Do you have all the information required to generate the gender pay gap statistics? Review your IT and payroll systems.
  • Which elements of your remuneration packages would be reportable under the Regulations? Consider overtime, bonuses, all benefits including any flexible benefits scheme etc.
  • Can you produce preliminary data based on April 2016 pay to understand what the current pay gap is, and identify any problem areas? Consider what changes you might want to make to address any issues before April 2017 (e.g. could any existing benefits be provided by means of salary sacrifice so their value wouldn’t need to be reported?)
  • Would it be helpful to obtain additional information to assist in analysing the gender pay gap information and to provide an explanation of the results? (e.g. breakdown between part-time and full time roles, numbers of women in senior roles, number of employees on family leave with a gender breakdown, skills shortages in roles which require a salary premium etc.)
  • Who will be responsible for preparing the report internally or would you would like to hire external agencies to undertake it? Ensure that whoever will be signing the written statement confirming the report’s accuracy is familiar with the Regulations and involved in producing the pay gap information.
  • Are senior management aware of the need to produce a report? Consider whether any steps need to be taken in relation to bonuses due to be paid in the next 12 months (e.g. additional training for managers making decisions, additional level of analysis / moderation before bonuses are paid, if paid in April consider a different pay date to avoid them being double-counted).

Final thoughts
Watch this space for government guidance to be published this summer and any changes which may be introduced in the final version of the regulations. If you would like any advice in the meantime, please feel free to contact one of the team.