Businesses which fail to act face reputational damage, writes Elouisa Crichton
The gender pay gap is not a new issue, but has been hitting the headlines recently, with statistics concerning the impact that having a baby can have on women’s pay when they return to the workplace. This is a complex issue and from next year many employers will be expected to publish a report on their gender pay gap.
The gender pay gap is the difference between the average pay for men and women. In 2015, the gap was 19.2 per cent. There are a number of explanations for this difference that go beyond men simply being paid more for the same work, including: fewer women in senior roles, women being promoted later and less frequently, more women working part-time and more women in low-paying sectors.
A gender pay gap does not necessarily mean there is a breach of equal pay law. Instead, it could mean that there are barriers to promotion for women, or that women are not accessing more skilled roles.
The draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 were published in February 2016. The final regulations are expected to come into force on 1 October. Employers with 250 or more relevant employees on 30 April each year will be covered by the regulations. .
Organisations will need to publish their first report in respect of the “snapshot” pay period (based on the employer’s normal pay period, e.g. weekly, monthly, etc.) for 30 April 2017. The deadline for publishing the report will be 29 April 2018. The report needs to include information about the average gross hourly pay for male and female employees. The figures must be shown in a number of ways, which will help to highlight where particular issues lie. In particular, the report must show:
(1) The overall gender pay gap for the snapshot period. The average needs to be shown in two ways: the mean (all the pay figures added up and divided by the total number); and the median (all the pay figures lined up and the middle one selected). The mean figure could be skewed by individual high/low earners, so the median is considered more helpful. If annual bonuses are paid in the period then this may have a dramatic impact on the headline average pay figures.
(2) The number of men and women within each of four pay bands/quartiles. For example, if the lowest paid person earns £20,000 a year and the highest paid earns £100,00, the four pay bands/quartiles would be: (1) £20,000-£40,000; (2) £40,000-£60,000; (3) £60,000-£80,000; (4) £80,000-£100,000. The organisation must disclose how many men and how many women are in each quartile. This demonstrates whether there is a disparity in terms of seniority within the business.
(3) The gender pay gap for annual bonuses. The difference between men and women’s mean bonus pay over the previous 12-month period.
(4) The proportion of male and female employees who received a bonus. The percentage of men and women in receipt of any bonus in the same 12 month period.
Employers can choose to include an explanation of any existing pay gaps and set out what action they plan to take, though this is not mandatory. The report must be published on the employer’s website and be available online for three years. The information must also be uploaded to a government-sponsored website.
The regulations do not include any formal sanctions for non-compliance. However, we understand the Government is proposing to: run periodic checks for non-compliance; produce tables by sector of employers’ reported gender pay gaps; highlight and identify employers publishing particularly full reports and explanatory information; and possibly publicise the identity of employers known not to have complied. At this stage, the risk of non-compliance appears to be reputational only – a “name and shame” approach. At this stage, employers should take advice on if, and how, to carry out an initial assessment of their workforce to identify any gender pay gap issues, and potentially take steps to resolve them prior to 30 April 2017.
• Elouisa Crichton is a Solicitor with Shepherd and Wedderburn