On the 12th February the Government published its draft regulations providing for mandatory gender pay reporting, for consultation until 11th March. What are the implications for businesses and what do you need to consider now?
Let’s start with a quick look at who’s potentially affected and how.
Who is affected?
The regulations will apply to private and voluntary sector employers with 250+ employees; ‘employee’ for this purpose will mean anyone who ordinarily works in Great Britain, whose employment contract is governed by UK law.
What obligations will employers be expected to comply with?
Employers will be required to publish a set of data showing the extent of the gender pay gap in the organisation, including:
- The difference in pay between male and female employees using both mean and median averages.
- The difference in mean (not the median) bonus between male and female employees
- The proportion of male and female employees who receive bonuses
- The number of men and women in each quartile of the employer’s pay distribution
These figures will be calculated using hourly rates of pay, to ensure averages are not affected by the number of hours worked. Pay will include basic pay, paid leave, maternity and sick pay and bonus pay. Overtime is not included.
The publication will be annual, and must be accessible to employees and the public on the employer’s website for 3 years, as well as being sent to the government.
What steps should employers take?
If approved, the regulations will come into force on 1st October 2016. The first pay period for which data must be collected will be April 2017, and the first set of data must be published within 12 months of that date.
Employers will face the administrative burden of capturing, analysing and publishing the data, and will also have to address any potential reputational damage that could be caused by revealing a gender pay gap.
Employers should therefore ensure they have processes in place in time to collect the required data, and to consider steps they can take to address any gaps that may exist. Employers may wish to review equality and diversity policies and practices, salary review procedures and most importantly may wish to reduce any gap that is identified prior to April 2017.
Employers will have the opportunity to provide an explanation of the data they publish to explain any disparity in pay, and to set out what positive actions will be taken to address the issue.
Are there any consequences of such regulations?
As of yet there are no proposed sanctions for failing to comply, but the Government intend to review employers that comply, and may “name and shame” those who have not complied.
Of course, being named and shamed is unpleasant, but there’s actually a more important point to note. Remember that equal pay law has been in force since the 1970s, so this won’t introduce any new protection as such. What it will do though, is to highlight data that may be useful ammunition in equal pay claims.
And that’s why now is a good time to look at this and make sure that when you start reporting you’re already conforming to the law regarding equal pay (which you should be anyway). Then when the new law comes in the spotlight won’t be on you, for all the right reasons.