Gender pay reporting: the regulations have been published – what should employers do now?

The government has today published the draft The Equality Act (Gender Pay Gap Information) Regulations 2016 (the Regulations) and related consultation. Having stated that tackling the gender pay gap was a priority, in July 2015 the government published a consultation to seek views on its gender pay gap reporting proposals. The follow-up consultation and Regulations published today will, in the government’s estimate, affect 7,960 employers and 34% of the total workforce in Great Britain.

Timing and publication

The Regulations are now open for consultation until 11 March 2016 and are scheduled to come into force on 1 October 2016.

Employers with 250 or more employees have until April 2017 to prepare for the ‘data snapshot’ of their gender pay gap. This data must then be analysed and published by April 2018 (or an earlier date of the employer’s choosing).

What are the key gender pay gap reporting duties for employers?

Employers have been awaiting the details of the reporting requirement. It was announced last year that bonus data would be included in the reporting requirement. We now know the following further details:

• The mean and the median: Gender pay gap figures are to be calculated using both the mean and the median. There is no requirement to give a more granular breakdown or to breakdown by pay grade or according to part-time/full-time status.
• Exclusions: Overtime will be excluded, but employers can also report on this voluntarily if they wish. Expenses, benefits in kind, the value of salary sacrifice schemes and redundancy pay are all excluded from ‘pay’ for the purposes of calculating the gender pay gap.
• Inclusions: Basic pay, paid leave, maternity pay, sick pay, area allowances, shift premiums, bonus pay, on-call and standby allowances and car allowance all form part of pay for the purposes of comparison.
• Quartiles and ceilings: There will be a requirement to report on employee salary quartiles. The employer will calculate the salary quartiles themselves based on their overall pay range. The government views this information as a good indicator of the ‘ceilings’ for men and women progressing in an organisation.
• Bonuses: A separate analysis will be required of all bonus payments made in a 12 month period and the difference between the bonuses of men and women published. Employers must also publish the proportion of male and female employees who received bonus pay. This should encourage more transparency in reward policies. The government is keen to address the 57% gender bonus gap it believes currently exists across the whole country.
• Narrative reporting: There is no requirement for narrative reporting, but employers will be encouraged to do so as good practice. This could help to give context to the figures, explain gaps and identify what actions are or will be taken by the business.
• Confirmation: A written statement by a company director (or employee of equivalent seniority) confirming that the information is accurate must accompany the gender pay gap details.
• Publication and timing: First publication of the gender pay gap information is required to take place within 18 months of commencement of the regulations (which is due to be on 1 October), based on a snapshot of data at 30 April 2017. So employers will have 12 months from April 2017 to publish the data (on a date of their choosing, and once they have had the opportunity to analyse it) i.e. by April 2018. The information should also be notified to the government through a government-sponsored website.
• Publication on a website: Reporting will be required on an annual basis and the information is to be published in English on a searchable (and publicly available) UK website, where it must remain for at least three years (in order to show what progress is being made in closing the gender pay gap).
• Compliance: The government will be able to run periodic checks for non-compliance, and is planning a policy of ‘naming and shaming’ those known not to have complied.
• Penalties: At present there is no civil penalties regime, but this may be reviewed in the future.
• Guidance: A package of guidance is due to be published by the government before implementation. 

What do employers need to do now?

Employers now have just over a year before having to take a ‘snapshot’ of the gender pay balance in their workplace. Analysing any pay gap and implementing strategies to address issues identified takes time. Employers should identify and analyse any gender pay gap as soon as possible. Auditing pay arrangements for gender-based inequalities may also reveal gaps in pay that are potentially discriminatory for other reasons (for example, on the grounds of age). Employers will need to make a decision as to whether these inequalities will be addressed at the same time as those resulting from gender.

Employers wanting to explore any potential liabilities on a confidential basis before having to publish gender pay gap data should consider upfront whether to involve their lawyers in the process. Doing so can make the investigations and analysis of any gender inequalities legally privileged. However, any process needs to be strictly managed to protect legal privilege and not all correspondence can be protected.

What policies need to be reviewed in preparation for gender pay gap reporting?

As well as crunching the numbers to produce the gender pay data in accordance with the Regulations, employers will also need to look at how their wider policies and practices are impacting on any gender pay gap in their business. Employers should:

• Review recruitment and promotion practices.
• Evaluate flexible working to ensure commercially viable arrangements are being supported.
• Consider whether Shared Parental Leave should be paid at the same rate as Maternity Leave to increase the flexibility available to female employees wanting to balance their family commitments with career progression.
• Review how gender pay gaps on mergers and acquisitions are identified and managed. What are the potential costs involved in addressing inequalities?
• Consider how the Transfer of Undertakings (Protection of Employment) Regulations 2006 impact on their ability to address pay inequalities. How will inherited inequalities be addressed and how will integration impact on the existing gender pay balance in your business?
• Decide on the team of employees and technology needed to analyse the pay data in your workplace. Will you need specialist assistance? 

We shall be looking at the Regulations in more detail and are happy to discuss the issues it raises further with you.