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Gender pay gap reporting: what's required - and when?

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This month the Government published its response to the summer 2015 consultation on ‘Closing the Gender Pay Gap’ and the new draft regulations –  draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016.

The response and the draft regulations lay out the framework for the new compulsory gender pay gap reporting regime, likely to come into force in October 2016 with the first snapshot reports required to be published in April 2017.

In 2015 the Office for National Statistics published figures indicating a gender pay gap of 9.4% for full-time employees, and 19.2% for all employees. Against this backdrop of pay inequality, the current proposals have been welcomed by many as an important step towards gender equality by increasing transparency and shining a spotlight on current unequal practices. However the measures, originally intended to come into force in spring 2016, have also received criticism for further delay in implementation.

It is important for affected employers to familiarise themselves with the proposals and to take practical steps now to prepare for the introduction of the new reporting requirements.

Content of the Government Response and Draft Regulations

The Government Response and draft Regulations lay out the framework of the future gender pay gap compulsory reporting regime.

In summary, the measures:

  • Apply only to private and voluntary sector employers in England, Wales and Scotland with 250 or more employees working in the UK, though this will be reviewed after five years;
  • Introduce reporting requirements for employers to publish gender pay gap figures, providing mean and median pay information, as well as information on how many men and women work in each salary quartile;
  • Require employers to separately analyse all bonus payments made in a 12 month period, and publish the different figures for men and women (in response to concerns of the disproportionate impact that bonus payments in the financial sector have on the gender pay gap);
  • Allow, and indeed encourage, employers to provide a contextual narrative to the information they publish;
  • Require that publication of gender pay gap figures be on an annual basis, with the first publication of information taking place within 18 months of the commencement of the Regulations so by April 2018 at the latest. Employers can pick a publication date of their choosing up to that deadline;
  • Require employers to produce a data snapshot 6 months after the commencement of the Regulations, so by April 2017;
  • Require employers to publish their gender pay information in English on a searchable UK website that is accessible to employees and the public, and to send evidence of compliance to a Government sponsored website. Employers must maintain that information for 3 years, to allow tracking of progress;
  • Will not have a phased introduction with large employers going first;
  • Will not introduce civil penalties for non compliance (to be kept under review)  though the Government intends to encourage compliance by other means e.g. periodic checks; publishing a league table ranking employers by their pay gaps; naming and shaming employers who fail to comply etc.

Timescale for implementation

These proposals originate from an initiative by Harriet Harman, former acting Labour Leader, in seeking Government powers in the Equalities Act 2010 to force reporting by companies of their gender pay gap. Instead, the coalition continued their “voluntary” approach. Eventually the Conservative party’s 2015 manifesto promised to introduce gender pay gap reporting.

However, while the new rules had originally been intended to come into force in March 2016, the deadline for substantive reporting of gender pay data has now been pushed yet further back to 2018.

The proposed timeline for implementation  is now:

  • 11 March 2016: Closing date of follow-up consultation on the draft regulations;
  • 1 October 2016: Regulations to come into force;
  • 30 April 2017: Employers must produce a preliminary data snapshot of gender pay information;
  • 30 April 2018: Employers to report gender pay gap information (on a date of their choosing prior to this deadline).

This delay, which has been criticised by Labour and trade unions, is clearly disadvantageous for female employees, who will now have to wait another further two years to discover the extent of systemic pay differences in their workplace.

For employers, on the other hand, it offers a breathing space to get to grips with the regulations and address existing pay inequalities before the reporting requirements take effect.

We offer points below to both employees and employers on the practical impact of the new reporting rules.

What the reporting regime means for employees

The content of the new reporting requirements will be welcomed by many as a step towards greater transparency and equality in the workplace. Once the reporting requirements have kicked in, if your employer has more than 250 relevant employees then you should be able to find out the extent of the gender pay gap in your workplace by accessing your employer’s website and/or a government website. The reporting regime is also likely to encourage employers whose current practices are unequal to clean up their act.

However, the delay in implementation will mean you have to wait until April 2017 to see any data on the gender pay gap in your workforce, and until 2018 to see the substantive figures under the new Regulations.

In any event, you can request that your employer provide you with any such information voluntarily, before they are legally obliged to publish it. You have the right to raise a complaint, or grievance, at work which your employer must deal with and, if in relation to unequal pay levels, this might include their providing information requested on pay if relevant to any reasonable and justified complaint.

What the reporting regime means for affected employers

Once the new reporting regime is active, the most obvious repercussion from an employment law point of view is potential equal pay grievances and claims from  employees. However, the impact on your business could be much wider, with the potential to damage your reputation, goodwill and staff morale. Also potentially an impact on the success of tenders and pitches for business where there is heightened sensitivity, amongst customers and contractors, to the treatment of employees within a contracting business and the reputational risks in that context.

The delayed timescale for implementation allows employers some breathing space before the reporting requirements kick in. Given the potential consequences of transparent reporting it is important that you use this time well.

You should familiarise yourself with the ins and outs of the new reporting requirements, and think about how you can comply with them in a cost effective manner. The government has indicated that the majority of employers should be able to fufill the reporting requirements using existing HR data. Assess whether this is the case for your business, and whether a further data gathering exercise is necessary.

 We also suggest that you review your pay structures and figures across the board as soon as possible, to identify any worrying  discrepancies in levels of pay; check the methods of calculation for median and mean figures under the regulations and apply those to your workforce; consider the reasons for any differentials. Then assess the current extent of any gender pay gap, so that remedial steps can be taken before the public reporting requirements commence.

This article was written by Alison Downie, Partner & Head of Employment Department, with assistance from Emily Kearsey, trainee solicitor.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.