The British Government has confirmed details of how larger employers will be required to report on their gender pay gap. It has also outlined its proposed timescale. The detail is contained in the Government’s response to its consultation on gender pay reporting and in draft regulations published for consultation today.
Responses to the consultation on the draft regulations are required by March 11th, 2016.
Who is affected?
The obligation to publish gender pay gap information will apply to private and voluntary sector employers in England, Wales and Scotland employing 250 or more employees. The Government has confirmed that “employees” for these purposes includes anyone employed under a contract of employment, a contract of apprenticeship or a contract personally to do work, although this is not clear from the draft regulations themselves.
David Cameron previously announced that the obligation will be extended to public sector employers, although they are not covered by the draft regulations published today. The Government will consult separately on how public sector employers will comply.
When must they comply?
Employers will have to publish their pay gap information by 30 April 2018 at the latest and annually thereafter. This will be based on pay data from a specific pay period which includes 30 April each year, starting 30 April 2017. In effect this means that the pay gap will be judged in April each year.
What do they have to do?
The specific requirements are for employers to:
- publish the single figure difference between the mean hourly pay of men and women. This is intended to address the imbalance between women being over-represented at the low earning extreme, and men over-represented at the high earning extreme;
- publish the single figure difference between the median hourly pay of men and women. This is suggested to be the best representation of the ‘typical’ difference, as it is unaffected by a small number of very high earners;
- use pay data from a specific pay period which includes 30 April each year, in an effort to avoid seasonal fluctuations in the workforce;
- publish the difference between the mean bonuses paid to men and women. Only those employees who receive bonuses should be included;
- publish the proportion of male and female employees that received a bonus; and
- report on the number of men and women in each quartile of their pay distribution. The aim of this is to identify the numbers of women in each quarter by the overall pay distribution.
As well as basic pay, pay includes paid leave, maternity and sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider and fire warden allowances). It does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.
Pay is to be calculated before deductions for PAYE, national insurance, pension schemes, student loan repayments and voluntary deductions.
Employers will not be required to publish contextual information explaining any pay gaps and what they propose to do to address them, but this will be strongly encouraged.
Guidance to help employers comply will be published later this year.
Where must they publish the information?
Employers must publish the information on their UK website and must also upload it to a Government sponsored website. The company’s website must be searchable and available to employees and the public. The information must be available for three years.
Penalties for non-compliance
The Government has decided against introducing fines for non-compliance for the time being.
The Future
Within five years of the Regulations coming into effect they will be reviewed by the Government to assess their effectiveness and ensure they aren’t an unnecessary burden on employers. Compliance will be closely monitored but the lack of fines makes the regulations pretty toothless, aside of course from reputational damage caused by non-compliance.
Implications
Mandatory gender pay gap reporting will clearly have a significant impact on private sector companies. A total of 7,960 businesses will be affected and the Government estimates that it will take up 13.5 hours of HR’s and one hour of the CEO’s time to comply with the requirements each year. The cost to businesses of complying with the Regulations is estimated to be £3.7m, and that’s without taking legal advice around any concerns highlighted from the figures.
Employers may wish to get ahead of the game by carrying their own internal pay audit. If gender pay disparities are highlighted, this may afford employers time to address them ahead of the legislation coming into force, and gender pay information having to be publicly shared. It will also allow employers time to develop the procedures/methods necessary and identify who will be giving up around 14 hours of their time each year to provide the required information.
