Gender pay gap reporting: impact on listed companies

Gender pay gap reporting is expected to become law in October this year, with all employers with 250 or more relevant employees needing to comply with this new reporting requirement. Employers must take their first ‘gender pay snapshot’ on 30 April 2017 and will then have up to a year to publish the data. They will also have to publish gender pay information in respect of bonuses paid in the 12 month period prior to 30 April 2017. This means that bonus payments made from this May will potentially be caught.

Whilst final regulations have not been published, employers should start taking steps to prepare now. Taking early action is particularly important for listed companies who will have greater exposure than many to the reputational risks inherent in reporting a significant gender pay gap. Osborne Clarke is hosting a webinar on 27 April 2016 which will look at the impact of the new gender pay reporting obligation – please register using the link below.

What pay gap information needs to be provided?

A government consultation on the draft regulations implementing gender pay gap reporting closed last month. We know that a number of submissions have been made about what should be included in the definition of pay and how bonuses should be disclosed, but the current position means that employers will need to disclose:

• overall mean and median gender pay gap figures, calculated using average hourly pay
• the mean bonus pay gap over the past 12 months, and the proportion of male and female employees receiving a bonus in that time
• the number of men and women in each quartile of the employer’s pay distribution

We are waiting for final clarification on the definitions of pay and bonus for the purposes of these calculations but it should be noted that they are currently defined widely. Bonuses for example covers profit-sharing and performance bonuses, commission, long-term incentive plans and the cash equivalent value of shares on the date of payment.

There is no requirement for narrative reporting, but it’s expected that most employers will want to provide some colour to their statistics, particularly where they show significant gaps.

Employers will have to notify the government of their figures via a government website and publish the information in English on a searchable UK website accessible to both employees and the public. They will need to keep the information up on their website for 3 years, and will also need to include a statement confirming that the information is accurate. There are currently no proposed sanctions for non-compliance, but the government intends to “name and shame” those who fail to disclose the required information.

How is the overall gender pay gap calculated?

The overall gender pay gap is a percentage, calculated by dividing the difference between the average pay of male employees and average pay of female employees by the average pay of male employees.

Pay includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay, and certain types of other pay. It excludes pay for a different pay period, overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears and tax credits. Pay is calculated gross before deductions for PAYE, national insurance, pension schemes, student loan repayments and any voluntary deductions.

There is some debate over whether the definition of “pay” is appropriate. In particular, including maternity pay is likely to skew the average pay for female employees downwards, and it would arguably be more helpful to know what the overall gender pay gap was excluding bonuses, given that the mean bonus pay gap is also being disclosed separately.

Only relevant employees employed at 30 April need to be included. At the moment, a “relevant employee” is defined as someone who ordinarily works in Great Britain and whose contract of employment is governed by UK legislation. This is a narrower definition than originally proposed, and it seems likely that there will be further clarification about which employees are intended to be captured in the final Regulations.

Who will need to report on their gender pay gaps?

Private and voluntary sector employers with at least 250 relevant employees on 30 April each year. At the moment there is no requirement to aggregate employees across a group of companies, so only individual companies within the group which themselves employ 250 or more relevant employees will have to comply. However, that could mean that a large group ends up having to produce multiple reports, and that some employees within the group aren’t captured.

The GC100 (the group of general counsel and company secretaries working in FTSE 100 companies) is reportedly seeking flexibility in the reporting requirements, so that groups can either aggregate employees across the group and publish a single report or publish reports for individual subsidiaries. A further update is expected when the final Regulations are published, but it is possible there may be some move towards group aggregation as the Government has indicated this issue is under review following consultation feedback.

What to do now

Osborne Clarke is hosting a webinar on Wednesday, 27 April 2016 focusing on the gender pay gap reporting requirement, with guest speakers from GapSquare who will discuss their free online tool, which enables users to produce their pay gap data in accordance with the anticipated statutory requirements. The webinar will also cover issues around preserving legal privilege in gender pay gap analysis.

When:

• Wednesday, 27 April 2016
• 9.30-10.30am (UK time)

Registration:

Please click here to register.