Mind the Gender Pay Gap

From April 2017, private and voluntary sector organisations in England, Wales and Scotland with 250 or more employees will have to publish the differences between what they pay men and women in salaries and bonuses. Failure to comply with the new legislation will constitute an “unlawful act”, meaning that the Equality and Human Rights Commission could take enforcement action, although there are no published penalties for non-compliance as yet. However, this will be reviewed if levels of compliance are ‘not satisfactory’.

In firms with a group structure, each legal entity will need to report its data. There is no legal requirement on smaller employers to report data, but they will be encouraged to do so. Employers whose headcount varies will have to report in any year in which the headcount is 250 or more.

Background

In her first statement as Prime Minister, Theresa May pledged to create a “Britain that works for everyone” and highlighted the gulf between men and women’s earnings, although work on closing the gap had been going on for some time. In 2015, David Cameron announced that the government would “end the gender pay gap in a generation” and consultations then took place on draft regulations around the issue.

According to the Office for National Statistics (ONS), the gender pay gap for all types of employment contracts stands at 18.1 per cent, while for full-time workers based in the UK, it is 9.4 per cent. Meanwhile, the Chartered Management Institute (CMI) claims that male managers earned average bonuses twice as big as those of their female counterparts, which aggravated the gap. They also received salaries that were almost 25 per cent larger.

How will the new legislation affect employers?

The government has collaborated with Acas to publish guidance for the 8,000 or so employers who will have to comply with the regulations. This lays out the key points of the new legislation and explains the calculations employers will have to do to work out what the gaps are.

The guidance explains that employers will need to collate gross hourly pay data from their systems for their employees’ relevant pay periods and must include the “snapshot date”, which will always be 5 April. They must also collate bonus information for the 12-month period ending on 5 April, although for this first reporting year, the bonus period will run from 6 April 2016 to 5 April 2017, inclusive.

They should also note that the regulations apply the same definition of ’employee’ as the Equality Act 2010. This means that employers should count part-time as well as full-time employees, workers on zero-hours contracts, apprentices and any employees who work abroad. However, they should not include workers on maternity leave or those on sick leave on the snapshot date.

There are six calculations to carry out and when these have been completed, the results must be confirmed by an appropriate person in the organisation, such as a chief executive, and published on the employer’s website and a government website, in English, by April 2018. The report must remain on the website for three years but can be left up for longer if the employer so wishes.

The calculations are:

1. The average gender pay gap as a mean average
2. The average gender pay gap as a median average
3. The average bonus gender pay gap as a mean average
4. The average bonus gender pay gap as a median average
5. The proportion of males receiving a bonus payment and proportion of females receiving a bonus payment
6. The proportion of males and females when divided into four groups ordered from lowest to highest pay.

Employers will be able to provide a narrative with the results if they wish and this should explain the reasons behind the results and give details about actions they are taking to reduce or eliminate the gap. Given that the figures must be made public, it would be advisable to do this, as otherwise employees could misunderstand the figures, resulting in some heated exchanges with HR.

The guidance also includes how best to promote family-friendly working so that women can balance work and parental responsibilities, particularly for senior roles, and how to encourage men to use flexible working so that they share the responsibility of balancing work and a family life.

Don’t confuse gender pay reporting with equal pay

Acas underlines that gender pay reporting is different to equal pay, which deals with the pay difference between men and women who carry out the same or similar jobs or work of equal value. As they say, it has been against the law to pay people unequally just because of their gender since the 1970s.

What gender pay gap difference shows is the average pay between all men and women in a workforce. If an organisation has a particularly high gender pay gap, this could suggest that there may be issues to deal with. For example, it is more likely to show a lack of female representation in certain roles or at certain levels, not that the man in the office next door earns more for doing the same job.

Contact Briars Group today and find out what you need to do to submit your first set of results under the new legislation.

Find out more International HR information here.