Gender Pay Gap Reporting
In spite of the Equal Pay Act 1970, which prohibited less favourable treatment between men and women in terms of pay and conditions, and subsequent equality laws, there is still a significant gap between the pay of men and women in the UK.
To try to remedy this, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 came into force on 6 April 2017. They introduce mandatory gender pay gap reporting on an annual basis for private and voluntary sector employers with 250 or more employees. The Regulations include a number of amendments to the earlier draft legislation and firm up on what should be included in the figures to be reported and how these should be calculated.
Employers covered by the Regulations will be required to compute and report on the difference in pay between 'relevant' male and female employees using data from a specific pay period that contains the relevant 'snapshot' date – 5 April – from 5 April 2017 onwards. Employers then have 12 months beginning with the relevant date in which to publish the information – i.e. the first report will be due no later than 4 April 2018.
Employers must disclose the following information:
- The difference between the mean hourly rate of pay of male full-pay relevant employees and female full-pay relevant employees;
- The difference between the median hourly rate of pay of male full-pay relevant employees and female full-pay relevant employees;
- The difference between the mean bonus pay of male relevant employees and female relevant employees;
- The proportion of male and female relevant employees who were paid bonus pay during the 12 months ending with the snapshot date of 5 April; and
- The relative proportions of male and female full-pay relevant employees in the lower, lower middle, upper middle and upper quartile pay bands.
When deciding whether or not the 250-employee threshold applies, employers should note that the Regulations use the definition of 'employee' as per Section 83 of the Equality Act 2010, whereby 'employment' includes employment under a contract of employment, a contract of apprenticeship or a contract personally to do work – i.e. workers. However, the employer is not required to include data for employees employed under a contract personally to do the work if they do not have, and it is not reasonably practicable for them to obtain, the relevant information. A 'relevant employee' is one who is employed on the snapshot date. Note, this excludes partners in a firm (including in an LLP).
The Regulations set out six steps to enable employers to calculate a relevant employee's hourly rate of pay and explain how to determine the number of working hours in a week. The calculations will be based on the earnings of those employees in receipt of their 'ordinary' or 'full pay' on 5 April, not on actual pay as stated in the earlier draft Regulations. Employees on reduced pay during the snapshot period are not included – for example a woman on maternity leave being paid less than her full salary.
For the purpose of the Regulations, 'bonus pay' means any remuneration that is in the form of money, vouchers, securities, securities options or interests in securities, or relates to profit sharing, productivity, performance, incentive or commission. It does not include ordinary pay, remuneration referable to overtime or remuneration referable to redundancy or termination of employment. The Regulations specify at what point bonus payments are to be treated as paid to the employee, which is the point in time at which they would give rise to taxable earnings or taxable specific income.
Reporting on the relative proportions of male and female employees in each quartile pay band will involve determining the hourly rate of pay for each male and female full-pay relevant employee, ranking them in order from the lowest paid to the highest paid, then dividing them into four groups containing an equal number of employees. Where there are employees paid the same hourly rate in more than one quartile pay band, the employer must ensure, as far as possible, that the relative proportion of male and female employees receiving that rate of pay is the same in each of those pay bands.
Where companies have a group structure, the reporting requirements apply to each separate legal entity within the group that has at least 250 employees, not the group as a whole.
The report must be submitted together with a statement signed by a director or partner, or by a member of the business's governing body or its most senior employee, confirming its accuracy. These must be published on the business's website, so that they are accessible to employees and the general public, and retained online for three years so that year-on-year comparisons can be made. In addition, employers will have to upload the same information to a website designated by the Secretary of State.
The initial intention was to 'name and shame' employers who fail to comply with their gender pay reporting duties and to keep the issue of penalties under review. However, the Explanatory Notes to the Regulations make clear that failure to comply with an obligation under them constitutes an 'unlawful act' within the meaning of Section 34 of the Equality Act 2006, which empowers the Equality and Human Rights Commission to take enforcement action.
The Advisory, Conciliation and Arbitration Service and the Government Equalities Office have published guidance and fact sheets on this topic to assist employers in complying with their gender pay gap reporting obligations.
The Secretary of State will carry out a review of the Regulations within five years and report on their effectiveness. This will include an assessment of whether or not the objectives of the legislation could be achieved with a system that imposes less regulation.
The Government has also extended the requirement to report on the gender pay gap to public sector employers by way of the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017. The Regulations are introduced as part of the existing public sector equality duty and the snapshot date for the collection of data is 31 March, commencing with 31 March 2017. Public sector employers must therefore publish their first gender pay gap information no later than 30 March 2018.