Gender pay gap reporting

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Shortly before the general election, the Small Business, Enterprise and Employment Act 2015 was passed. This included a provision compelling the Government to make regulations under the Equality Act 2010 to require larger employers to publish information on whether there are differences in the pay of their male and female employees (the “gender pay gap”). The Government launched a consultation seeking views on the format and level of detail of the information that employers should be required to publish last year.

The Government has now published a summary of the findings of the consultation. The summary highlights that 82% of employers and business organisations agreed that the publication of pay information would encourage employers to take action to close the gender pay gap.

The Government has also simultaneously published draft gender pay gap reporting regulations (the “Regulations”), which it will be consulting on until 11 March 2016. The Regulations will, in summary, apply to employers with at least 250 employees in Great Britain. The Prime Minister has previously announced that the Government will be extending mandatory reporting to the public sector and that relevant bodies will be consulted with shortly.

The Regulations require employers to publish their overall mean and median gender pay gaps, based on an hourly rate. Employers will also need to calculate their pay quartiles based on their overall pay range, so they can also report on the number of men and women working across each quartile. This will enable employers to compare their gender pay gap statistics with national and international figures.

In respect of bonus payments, the Regulations stipulate that employers will need to publish the difference between the mean bonus payments made to men and women, as well as the proportion of male and female employees who receive a bonus. The intention is that this will highlight any gender pay disparity in bonus payments which is suspected as being a particular equality issue.

The Regulations do not stipulate a penalty for non-compliance, however the Government has said that the reports will be closely monitored during the initial years of implementation and the expectation is that those employers which fail to comply will be “named and shamed”. The Government will be publishing supporting guidance later this year to assist employers in complying with the Regulations. This guidance will set out how to account for different corporate governance structures (such as subsidiary and parent companies) and provide advice on the voluntary narrative to explain any pay gaps.

The Regulations are intended to come into force from 1 October 2016 and in summary (if unchanged) employers will have until 30 April 2018 to publish the required information for the first time (and then annually thereafter) on their website (where it must remain for 3 years). Employers will also be required to upload the information on to a Government sponsored website.

Practical advice:

• Larger employers who have not done so already need to start considering how they will comply with their obligations under the Regulations - particularly given this may require the introduction of new systems or processes to analyse gender pay gaps - and whether they will be able to justify any gaps that are identified.
• Employers may wish to carry out an equal pay audit before the Regulations come into force, although there are various issues carefully to consider before taking this step.