What's in the Government's consultation on mandatory gender pay gap reporting?

The Government has today issued its much anticipated consultation “Closing the Gender Pay Gap” (here) which will help shape the new statutory requirement for private and voluntary sector employers with 250 or more employees to disclose any gender pay gap in their organisation. The consultation also includes some broader questions on the important issue of gender pay equality, recognising that gender pay differences will not be magically resolved by a new disclosure regime.

The consultation closes on 6 September 2015 and with much of the detail left to be nailed down in light of the consultation responses, this is a real opportunity for all employers to make their thoughts known. Please let us know if you would like to be involved in this process.

Why is the Government consulting?

The Conservatives’ election manifesto committed to requiring companies with more than 250 employees to publish gender pay gap information. It reflects a late amendment to the Small Business Enterprise and Employment Act 2015 – made just before the General Election. That change required the implementation of s78 Equality Act 2010, which itself has sat dormant for the past five years. The consultation launched today is a step towards delivering on that promise.

The Government has also announced alongside this consultation its commitment to end the gender pay gap in a generation (see here). This is one step in that process.

What are the key points in the consultation on mandatory gender pay reporting?

Key issues to be determined include:

• What will be a workable approach to implementing s78 Equality Act 2010?  Should employers simply calculate “one overall gender pay figure that captures the difference between the average earnings of men and women as a percentage of men’s earnings” or “separate gender pay gap figures for full time and part time employees” or perhaps even “the difference in average earnings of men and women by grade or job type”. The consultation recognises that in determining the metrics to be used there is a need to balance meaningful and comparable data with commercial and individual confidentiality.
• Should the regulations prescribe for certain contextual information to be provided along with the gender pay figures i.e. why the figures show a gender pay gap and what remedial actions the business intends to take? Or should this be left to voluntary or perhaps non-statutory guidance?
• Should the publication of gender pay gap information be annual or less frequent, perhaps every two or three years instead?
• Where should any gender pay information be published? One suggestion is for a prominent place on an employer’s public website.
• How will the new right be enforced? The Government is consulting with the Equality and Human Rights Commission to discuss options around compliance, including issuing notices requiring compliance which could be enforceable by a court if not complied with. While s78 Equality Act 2010 indicates that regulations may make provision for non-compliance to be punishable on summary conviction by a fine, this option is not specifically raised by the consultation. In any event the publicity cost of a failure to comply is likely to be far more costly for a business than any fine imposed.

Perhaps of some comfort for employers is the fact that the consultation does recognise that this new disclosure obligation will incur costs for employers. It asks for an assessment of the costs of conducting gender pay analysis and publishing relevant information. However, arguably this is difficult until the new requirements are fleshed out in more detail.

And what wider equality issues is it seeking input on?

With its commitment to end the gender pay gap in a generation, the consultation also includes some wider questions including:

• How do you think the Government can work with business to support women to return to work and progress in their career after having children?
• How do you think the Government can make sure that older working women are able to fulfil their career potential?

Timing

The Government recognises that some employers may need to introduce new structures, systems or processes to conduct gender pay analyses and publish relevant information depending on the final form of the new regulations. With that in mind, it anticipates that regulations will be made during the first half of 2016 but that the commencement of the regulations should be delayed for an appropriate period to give businesses an opportunity to prepare for implementation.

There are also indications that the regulations may be commenced on a phased basis (similar to the implementation of pension auto-enrolment) with an option for larger employers, i.e. those with at least 500 employees to publish the required information earlier than those with 250 employees.

Next steps

Whilst the Government has made it clear in its announcement today that it is committed to gender equality in the workplace, how it sees this new disclosure obligation fitting into that picture remains to be seen.  The consultation itself raises the prospect of risks or unintended consequences which would “warrant dropping or modifying the implementation of s78”.  Indeed, Katja Hall, CBI Deputy Director-General  has commented that “While we believe publishing pay gap data could be misleading, we will work with the Government to ensure that rules on what is published are flexible enough to be relevant to each company”.  Other commentators have suggested that the mandatory reporting requirement could potentially be neatly side stepped by outsourcing employees.

Regardless of how the small print pans out, and in particular the metrics used in making a disclosure, employers must now start to plan for how the wider issues raised by this new reporting requirement.  For example:

• Recruitment and promotion practices will need to be reviewed.
• Flexible working arrangements should be evaluated to ensure commercially viable arrangements are being supported.
• Will Shared Parental Leave 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?
• What training will be required to address any gender pay gap identified?
• How will pay gaps identified on a merger or acquisition be managed? What are the potential costs involved in addressing inequalities?
• How will the Transfer of Undertakings (Protection of Employment) Regulations 2006 impact on your ability to address pay inequalities?
• What software will be required to analyse the pay data in your workplace? Will you need specialist assistance?

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