Does the rail industry need to mind the gender pay gap? A new legal disclosure obligation raises the stakes

A speech given by Transport Minister, Claire Perry, on 17 November 2015 has highlighted key concerns regarding gender imbalance in the rail industry – and the consequent risk of equal pay claims (see here). Last year Network Rail faced what was reported to be “the largest equal pay claim in rail history” when 30 of its female employees launched a claim on the basis that female managers were being paid between £3,000 and £4,000 less a year than their male counterparts (see here). Drawing directly on statistics obtained from a recent Women in Rail report the Minister noted:

• only 19% of women in rail are in managerial roles;
• the starting salary for station assistants (a group in which women are highly represented) is £12,500 a year compared to a typical engineer’s salary starting at around £40,000 a year; and
• women still make up only 13,492 of the 87,000 people working in rail.  This is almost exactly the same number of women working in rail in August 1914.

Rail is not alone in having to tackle this issue – gender imbalance is a well-publicised problem which many employers across all different sectors are struggling with. As a consequence, the government is expected to introduce regulations in 2016 which will require employers to disclose their “gender pay gap”. The consultation on the reforms closed in September this year and we are currently awaiting the government’s response. The response will provide much needed detail on the new obligations. However, employers who may be affected may well want to start preparing their strategy for compliance and wider gender equality issues now.

So what is this new obligation?

The detail will be in the government’s response and draft regulations. However, it is anticipated that it will entail the following:

• It will apply to employers with at least 250 employees. The government has recently indicated that it will be extending the obligation from private sector employees to those in the public sector and voluntary sector.
• It is likely that employers will be required to report on some or all of the following:
  • overall gender pay gap;
  • full and part time gender pay gaps;
  • differences in average basic salary and total earnings by job type and grade; and
  • bonuses, incentives and other reward components.
• It is suggested that this information will not need to be published more frequently than once a year and it may be that companies are only required to report every two to three years.
• It is anticipated that this information will be reported as part of an annual report, via a website or alongside tax statements.

So what should employers be doing now?

There are no mandatory steps to take at this stage. However, with the new disclosure obligation involving an analysis of employees’ personal data and the company’s (potentially sensitive) financial information, employers must start planning now how they will protect that data and manage the audit process. Key questions include:

• Is the employer potentially caught by the disclosure obligation?
• Can any gender pay gaps be identified with the benefit of legal privilege meaning that they should not have to be disclosed in any legal proceedings to maintain confidentiality?
• Will software or specialist assistance be needed to analyse pay data?
• Is your reputation at risk? Whilst the proposed penalty for failing to comply with the gender pay obligation is only £5000, there is a significant risk of negative publicity damaging brand and reputation. In turn this can impact on employee relations, recruitment and retention of talent.
• Are there gender pay gaps? Can they be objectively justified or are you at risk of equal pay claims? How will you close the gap and what are the practical and legal risks of doing so? Should you make a contingency now for equal pay liabilities?
• How will you address any changes needed to recruitment, promotion, flexible working and other practices in order to address any gender imbalance?

We shall provide a further update as more detail emerges. In the meantime, please do speak to a member of the team for more information on the next steps.