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The Equality Act 2010 contains provisions to prevent discrimination in society and the workplace, one of which is mandatory gender pay gap reporting for entities with 250 or more employees working in the UK.

The regulations regarding the gender pay gap apply from 1 October 2016 and require the first calculations to be made as of 30 April 2017 with an annual obligation then arising. Publication of the calculations is required by 30 April 2018.

It would be advisable for entities to start to look at these calculations now in order to identify any potential issues and ensure that these are addressed ahead of the required date for disclosure, as there is a possibility that where any pay gaps between males and females cannot be justified that an equal pay claim could be made against the employer.

The calculation

  • The values which employers will be required to calculate and disclose are as follows: –
    Overall average pay for males and females across the workforce.
  • Overall midpoint pay for males and females across the workforce.
    (Both of which will be calculated by use of an hourly rate for each employee)The number of male and female in each quartile of the employer’s pay spectrum  (Calculated by setting out all employees in ascending order of pay and counting the males and females)
    Average bonus payments made to males and females and the number of males and females who received a bonus payment  (Calculated over a 12 month period)

In calculating the above, pay will include basic pay, paid leave, statutory pay and allowances such as car allowance and bonuses. Items that are not included are overtime, salary sacrifice schemes and benefits in kind. The top three disclosures will be calculated as a “snap shot” and shall be carried out firstly at 30 April 2017 and then continued on an annual basis.The final disclosure should be calculated over a 12 month period to 30 April 2017 and also continued on an annual basis going forward.

Although not mandatory, employers are able to publish narrative to support the disclosures made. It is thought that doing so will be favourable as it will give the employer the opportunity to explain any ano
malies surrounding any gender pay gap,  set out any planned initiatives to address identified issues and help to defend any potential gender pay-related claims at an employment tribunal.Gender pay gap

 

Publication of gender pay gap information

The above information, having been signed by a director to confirm its accuracy, must be presented on a UK website that is accessible by the public by no later than 30 April 2018. This information should then be retained on the website for three years in order for progression to be viewed. In addition, there will be a government website to which the information must also be uploaded so that further analysis can be carried out by the government in terms of pay gap trends arising in different sectors and for compliance to be tracked. As it stands there are no penalties for non-compliance with the regulations although an approach of naming and shaming. Those who have not complied will be taken up as well as publication of those who have.

Action

Employers should start to make initial calculations of the required disclosures now in order to identify any potential variances between the pay of males and females so that these can be addressed or worked upon prior to 30 April 2017. When analysing the data obtained the following considerations should be made where variances between the pay of each gender are identified. If the average / midpoint pay for males of females differ, why is this the case? Can it be justified? If there is not an even split of males and females across pay quartiles, do you know why? Is this satisfactory? If there is a difference in bonuses paid to males and females, is this due to a particular circumstance? Is this fair? Where in any of the identified cases of variance there is not a reasonable, non-discriminatory explanation then action should be taken in order to address the issue and prevent any potential claims by employees regarding the gender pay gap.

 

Future

It is thought likely that the government will extend these reporting requirements to employers with less than 250 employees as the disclosures are likely to attract a lot of attention once made publicly available on 30 April 2018. It is therefore advised that smaller employers also start to consider the calculations in order to address any anomalies should the legislation be extended at a later date.

CONTACT

Please get in touch for more information.

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