In 2015, the Government announced it wanted to close the gender pay gap within a generation. In pursuit of that goal, draft regulations on gender pay gap reporting were introduced, the aim of which is to require large private and voluntary sector employers to publish annual data on employee pay. After much debate, the Government recently issued an amended version of the regulations confirming these are intended to come into force on 6 April 2017 (provided Parliamentary approval is given).
The gender pay gap is a separate issue from equal pay. Broadly, the right to equal pay concerns men and women receiving different rates of pay for doing the same job. The gender pay gap refers to the difference in average pay between men and women.
In the UK, taking into account full and part time workers, the gender pay gap is 19.2%. This means that, on average, women receive 19.2% less pay than men. There are various historical and cultural factors which have resulted in this gap, including women being over-represented in low paid sectors, being more likely to be in part time work and bearing the majority of the responsibility for childcare. A statutory obligation to report statistics will of itself not change this, but it is hoped that gender pay gap reporting will result in greater awareness of what steps can be taken to address this gap, particularly as there may be reputational consequences for organisations where the gap is significant.
The regulations are known as the Equality Act 2010 (Gender Pay Gap Information) Regulations and require private and voluntary sector employers with more than 250 employees to publish certain information about its employees as at a ‘snapshot date’, which will be the 5th April each year. The information to be published is:
- The percentage difference in mean hourly pay between male and female employees, and in median hourly pay between male and female employees. These figures should include a pro-rata proportion of bonuses paid during the relevant period
- The percentage difference in median and mean figures for bonuses between male and female employees.
- The percentage of men and the percentage of women who received a bonus
- The number of men and the number of women in each pay quartile.
Pay quartiles are to be determined by ranking employees by pay from lowest to highest, and dividing them into four equal groups to obtain four quartile groups, which are referred to by the regulations as Lower, Lower Middle, Upper Middle and Upper.
There have been some changes to the draft Regulations from those originally published earlier last year. These include:
- A “relevant employee” who should be included in the data published will be anyone employed on the snapshot date, and will include employees and those who fall within the wider definition of ‘worker’. The amended regulations provide an exception for workers where the employer does not have and cannot reasonably be expected to have the relevant data.
- For calculating mean and median pay gaps and pay quartiles, only ‘full-pay relevant employees’ are to be included, meaning that those being paid a reduced rate or nil as a result of being on leave are not included. This may include those on sick leave, maternity, paternity, parental, adoption or shared parental leave. It should be noted that figures in relation to bonuses will include employees or workers on leave.
- The Regulations set out a method for calculating gross hourly pay, in order to take into account the fact that employers may have casual workers who do not have fixed hours.
The required information must be published by employers within 12 months of the snapshot date, meaning that provided the regulations come into force as anticipated, the first gender pay gap reports will be due by 4th April 2018. The information must be published on the organisation’s website and remain there for 3 years, as well as be published on a still-to-be-set-up government website.
While not specified in the Regulations, it has been indicated that failure to comply with the requirements will constitute an ‘unlawful act’ in respect of which the Equality and Human Rights Commission may take enforcement action. It is therefore important for employers to be aware of whether the regulations will apply to them, and if they do to take measures to ensure they are collecting and reporting the required data.
The other significant consequence for employers of the introduction of the regulations is that of a level of transparency in their rates of pay. While the regulations do not give individual employees any rights against their employer, if the information reported by an employer highlights a pay discrepancy between men and women, there may be scope for individual employees to rely upon that information to support an equal pay claim to the Employment Tribunal. While a “gender pay gap” of itself does not mean that an equal pay claim will succeed, it does give employees reliable information which may point to discriminatory pay arrangements. Historically, equal pay claims were largely a problem of the public sector. However, more recently private sector organisations have also had to deal with such claims and it will be interesting to see whether the regulations prompt more litigation in this area. If you feel that you have been subjected to inequality in the workplace please get in touch with our team.