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24/04/2017

Reporting on the Gender Pay Gap – What Employers need to know...

The Equal Pay Act was introduced in 1970 and since then, employers have been under a duty to ensure that men and women receive equal pay for equal work.  Whilst this legislation has been in place for over forty years, the gender pay gap for 2016 was 18%.  

As part of the Government’s plans to “end the gender pay gap in a generation” it has implemented “The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017” (“the Regulations”) which impose an obligation on private sector organisations to report on gender pay.  The Regulations came into force on 6 April 2017.

In the public sector, obligations in relation to gender pay gap reporting have been implemented by way of the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 (the “Public Sector Regulations”). These came into force on 31 March 2017.

We set out below some key information applicable to the Regulations and the Public Sector Regulations. Further information can be found in the joint guidance “Managing gender pay reporting” produced by Acas and the Government Equalities Office.

What will employers have to do?

Employers need to publish an annual report setting out the following:

  • Mean and median hourly rate of pay gap between full pay male and female employees;
  • Mean and median bonus pay gap between male and female employees;
  • The proportion of men and women who received a bonus; and
  • The proportion of full pay men and women in each salary quartile.

What does “hourly rate of pay” include?

"Hourly rate of pay" includes ordinary pay and bonus pay during the relevant pay period but only the proportion of the bonus relevant to the pay period is to be taken into account. 

What is ordinary pay?

Ordinary pay includes basic pay, paid leave (e.g. holiday, sick, maternity), shift premiums, piecework and allowances. However, it does not include remuneration in relation to overtime, redundancy or termination of employment, pay in lieu of leave or benefits in kind.

What is bonus pay?

Bonus pay is any remuneration (other than ordinary pay, overtime or a redundancy or termination payment) that:

  • Is in the form of money, vouchers, securities options or interests in securities; 
  • Relates to profit sharing, productivity, performance, incentive or commission.

What is the snapshot date?

The snapshot date is the reference point for all gender pay gap calculations.  The snapshot date is 31 March for public sector employers and 5 April for private and voluntary sector employers.

What is the relevant pay period?

This means the pay period within which the snapshot date falls.  The pay period will usually be weekly or monthly but can be any other period over which the employee is paid.

What is a full pay employee?

A full pay employee is one who is not, during the relevant pay period, being paid at a reduced or nil rate as a result of being on leave.

What is the mean pay gap?

This is the percentage difference between the average hourly earnings of an employer’s full pay female employees and the average hourly earnings of its full pay male employees. 

What is the median pay gap?

This is the percentage difference between the median hourly earnings of an employer’s full pay female employees and the median hourly earnings of its full pay male employees. 

What is the bonus pay gap?

The mean bonus pay gap is the percentage difference in the average bonus paid to men and the average bonus paid to women over a twelve month period ending with the snapshot date. 

The median bonus pay gap is the percentage difference between the median bonus pay of men and the median bonus pay of women over a twelve month period ending with the snapshot date. 

What are “salary quartiles”?

Employers will need to list each full pay employee’s rate of pay in ascending order and then divide that list into four quartiles.  An employer will then report on the proportion of men and women in each quartile. 

Which employers will this effect?

All organisations which have 250 or more employees (as at the snapshot date) will have to report on gender pay.

When will employers need to publish their information?

The first report needs to be published within 12 months of the snapshot date, i.e. by no later than 4 April 2018 for private sector employers and by no later than 30 March 2018 for public sector employers, and annually thereafter.

Where the report should be published?

The report needs to be published on an employer’s own website (which is accessible to the public) and must remain available for three years.  It will need to be signed by a director to confirm its accuracy.  Employers must also upload the information to a government sponsored website.  

What should be published?

Aside from the above specified information, an employer should consider explaining the reason for any factors which may have led to the pay gap and any action plan to be implemented to address any pay gap.  However, a gender pay gap does not necessarily mean that the employer is discriminating in relation to pay between men and women.  

What if an employer does not comply?

The Regulations and the Public Sector Regulations do not include a penalty for non-compliance.  However, the notes to the Regulations state that a failure to report can be treated as an unlawful act allowing the Equality and Human Rights Commission to take enforcement action. In any event, the adverse publicity and reputational damage which could be generated from a failure to report should not be underestimated.

What should employers to do now?

The Regulations and the Public Sector Regulations came into force on 6 April 2017 and 31 March 2017 respectively.  As such, employers should now: 

  • Capture the pay data for the relevant periods;
  • Consider who will be responsible for preparing the gender pay gap information;
  • Calculate the gender pay gap information and if there is any pay gap then identify whether there is an underlying rationale for the pay gap or any issue that needs to be addressed;
  • Review current pay practices and the gender make up of your workforce;
  • Consider how you will present the report both internally and externally, and
  • Finally, publish your report!

For further information please contact Graham Irons, employment law partner.