This information could well prompt questions or even equal pay claims by employees or their representatives and could cause reputational damage if unexplained.
Equal pay for men and women has been a live issue since the late 19th century, with the issue of unequal pay highlighted by women taking on jobs previously done by men in World War I. However, it wasn’t until a strike in 1968 by women sewing car seat covers in the Ford factory in Dagenham (portrayed by the 2010 film Made in Dagenham) that law was finally made to address the issue. The Equal Pay Act 1970 came into effect in January 1976 to ensure equal pay and benefits for men and women doing work which is of equal value, unless the difference can be justified for reasons other than a difference in gender.
There is still a significant difference between the average pay of men and women, with the gap currently standing at 19.2%. The reasons for this gap are varied and include the different occupations in which men and women work, women working part time and taking time out of paid work to look after family. However, there is also a significant proportion of the gap which is unexplained and which could be caused by unlawful discrimination. The Government is introducing these regulations as a means of trying to tackle this ongoing discrepancy and believes that they will force employers to think seriously about the reasons for any gender differences in pay in their workforce.
Employers will be required to publish percentage mean and median gender pay gaps across members of their workforce who ordinarily work in Great Britain under contracts governed by UK law. They will also be required to publish the number of men and women in each quartile of pay across their workforce, as well as the percentage mean gender bonus gap. Employers will be required to publish gender reporting information annually on their website, and leave it there for at least three years. They will also need to upload the information to a government website.
Employers will be able to add explanations for their gender pay gap to the information that they publish, although they are not required to do so.
The requirements will not apply to public sector employers initially, so they won’t catch local authorities or schools maintained by the local authority, for example. However, they are likely to catch housing associations, care providers, charities and multi-academy trusts with a number of schools. These requirements are also likely to be extended to the public sector in due course.
The percentages will need to be calculated based the gross hourly pay rate which will include the following:
- Basic pay;
- Paid leave;
- Maternity pay;
- Sick pay;
- Shift, on call and standby allowances;
- Area allowance (e.g. London weighting);
- Other pay (including clothing, first aider and fire warden allowances).
It will not include overtime, expenses, benefits in kind, redundancy pay and the value of salary sacrifice benefits. Pay is to be calculated before deductions such as tax and national insurance, pension contributions and voluntary deductions.
Bonuses will include profit sharing, productivity and performance payments, incentive pay, piecework and commission.
The hourly rate is to be calculated on payments made during the pay period which includes 30th April 2017 (or for bonuses, payments made in the 12 months before this date) and then 30th April on each subsequent year. The regulations are due to come into force in October this year, with the first reports due in by 30th April 2018.
At the moment, there is no direct sanction for non-compliance but sanctions could be introduced and any failure could be used as evidence pointing towards discrimination in an equal pay claim. In addition the Government has said that it will consider naming companies who do not publish the required information.
What could result from the publication of the information?
Gender pay reporting could well prompt employees and trade unions to ask further questions about any gap identified. They might also bring equal pay claims where employers report a significant gap or do not provide satisfactory explanations for their gap. Trade unions could also use the information to campaign for further detail to be provided in the future. Significant gender pay gaps could also prompt unwanted media attention, as well as problems with recruiting, engaging and retaining staff. Organisations could also be asked about their gender pay gap in tender processes.
What should we be doing now?
You should invest time now in identifying what your gender pay gap is and the reasons for it. This will help you to manage the risks that we’ve identified above. In particular, we anticipate that employers with any significant gap are likely to want to take the opportunity to proactively explain the reasons for the gap in order to reduce the chance of those risks materializing.
Now is therefore the ideal time, if there are gender pay issues in your organisation, to get your house in order. Steps you can take include:
- Carrying out an equal pay audit;
- Identifying any pay gaps;
- Analysing those gaps to understand the reasons for them;
- Comparing those gaps with reported gender pay gaps for the relevant sector/job role;
- Identifying risk areas;
- Putting in place an action plan for addressing those risks;
- Agreeing a communication plan in relation to gaps identified and reasons for those.
Employers who do not use a job evaluation scheme for evaluating their roles should also consider putting one in place to enable them to robustly defend any equal claims that are brought.
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