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Gender Pay Gap Reporting
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Pay inequality – the Government is about to clamp down

By 5th April this year, businesses need to get their house in order or face being publicly named and shammed, possible law suits from their employees, and reputational damage.

Whilst equal pay legislation has been around for nearly 50 years, pay inequality remains a fact in many UK companies.  These days occurrences are more likely to be attributed to historical gender stereotyping of roles, rather than a deliberate attempt to treat female workers less favourably, however the consequences for employers can be both expensive and damaging to their reputation.

Until now many equal pay issues have remained hidden, with employers and employees often unaware that a problem exists.  However, things are about to get interesting with the advent/introduction of Gender Pay Gap Reporting this April.


What is Gender Pay Gap Reporting?

Whilst Equal Pay legislation is concerned with the pay differences between men and women who carry out the same or similar jobs, the Gender Pay Gap will look at the differences in the average pay between men and women, regardless of what their role is. 


So what will companies have to do when the legislation comes into force?

Organisations who employ over 250 staff will be required to report on data to demonstrate how balanced their pay structures are between the sexes.  The report will be based on information on a “snapshot” date – the 5th April 2017 and will require information on 4 key ratios:

  • The difference between the mean and the median hourly rate of pay of relevant male employees  and that of relevant female employees;
  • The difference between the mean and the median bonus pay paid to relevant male employees and that paid to relevant female employees;
  • The proportions of male and female relevant employees who were paid bonus pay; and
  • The proportions of male and female relevant employees in the lower, lower middle, upper middle and upper quartile pay bands.

“Relevant” staff will include permanent staff as well as casual and bank staff and potentially some contractors.  However, staff who are being paid at a reduced rate during the relevant pay period as a result of being on leave, including maternity and sick leave, are excluded from the reporting requirements. That said, if a company pays bonuses, these employees will need to be included in the calculation of the gender bonus gap.


Publishing the Data

The information must be published within 12 months of the snapshot date so companies will have until 4 April 2018 to make the information available on their website in a way that is accessible to both staff and the public.  The information must also remain there for a period of up to at least 3 years. This will have to be accompanied by a written statement confirming the accuracy of the data, signed by a senior manager, such as a company Director. The information will also have to be logged on a Government website, once this has been released.


What are the consequences of non-compliance?

Whilst the regulations don’t actually set out details of any sanctions for companies that fail to comply with the requirements, the Government has stated that this would be seen as an “unlawful act” as defined within the Equality Act 2006, which would give rise to potential enforcement action from the Equality and Human Rights Commission.  The Government has also stated that it will closely monitor compliance by employers and intends to publish tables showing employers' reported pay gaps by sector, potentially publicising the identity of those not complying.


How should employers prepare now?

Given the potential risk to reputation for companies who choose to ignore the requirements, it makes commercial sense for organisations to prepare themselves now.  By running the reports in advance to generate the required data, companies will be able to see if any issues are highlighted through the relevant ratios.  With under 3 months until the all important “snapshot date” there is still time to review pay structures to ensure that there is appropriate balance and that gender bias has not been allowed to go unnoticed.

Whilst employers with under 250 staff may breathe a sigh of relief that they are not covered by the new requirements, the public focus on pay equality that the legislation is likely to bring, may lead to an increase in equal pay claims in general.  Therefore all companies would be wise to take this opportunity to review their pay and benefits arrangements accordingly and avoid falling into the “gap”!


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