The Government has published the final draft of the Gender Pay Gap Information Regulations 2017 (“the Regulations”) for private sector workers. In this article DTM Legal consider which businesses will be affected by the Regulations and the practical steps employers can take to help them comply.
The extent of the gender pay gap is not fully known and statics vary depending on who you ask. Government backed figures suggest the current gap is 18%[i], whilst others argue it is far higher at 24%, with a potential lifetime shortfall of £300,000[ii]. The muddled picture is a result of differing methods of calculation, with some comparing hourly rates, rather than annual earning and some exclude overtime.
The Regulations, which come into force on 6 April 2017, set out methods of calculation for the recording and publishing of equal pay data which should help paint a clearer picture whilst identifying the worst performing employers.
Which employers are covered by the Regulations?
Employers in the private and charity sectors with 250 employees or more will be covered by the Regulations. The Government has indicated that the Regulations will be expanded at a later date to also cover public sector workers. It should be noted that whilst partnerships and LLPs are covered by the Regulations, they are not required to publish data about the partners themselves.
Which employees count towards the threshold?
On first thought, counting employees should not present a difficulty to most employers. However, when we start to consider part-time workers, those off work due to sickness or maternity leave, apprenticeships and temporary contacts, the actual number of current employees becomes more difficult to ascertain.
The Regulations make clear that any employees under a contract of employment, contract of apprenticeship or a contract to personally perform work should be counted towards the threshold. This wide definition means that many self-employed workers who are engaged as consultants or independent contractors will be included. Those who are paid a reduced rate due to annual, maternity, adoption, shared parental, sick or special leave are specifically excluded. This should prevent the statistics from being distorted where an employer has a number of employees absent for whatever reason.
Each company within a wider group of companies will be required to publish its own data. Importantly, there is no requirement to aggregate the employees across the group. This could potentially result in larger group companies avoiding the Regulations due to the split of employees across the corporate group. The Regulations do not specify whether employees who work wholly or partly outside Great Britain should be counted although this may be clarified when guidance is published in the near future.
What information should be published?
Relevant employers are required to take a snapshot of pay data on 5 April each year, with the first snapshot date being 5 April 2017. Employers are required to publish the snapshot within 12 months, therefore on or before 4 April 2018.
The following six pieces of information are to be disclosed:
- The difference between the mean hourly rate of pay for full-pay male and full-pay female employees;
- The difference between the median hourly rate for pay for full-pay male and full-pay female employees;
- The difference between the mean bonus pay paid to male relevant employees and that paid to female employees;
- The difference between the median bonus pay paid to male relevant employees and that paid to female relevant employees;
- The proportions of male and female relevant employees who were paid bonus pay; and
- The proportion of male and female full-pay relevant employees in the lower, lower middle, upper middle and upper quartile pay bands.
The Regulations contain step-by-step instructions for employers to follow when making their calculations. The figures should be based on “ordinary pay” which includes: basic pay; allowances (excluding payments to reimburse expenses); shift premium pay; piecework pay; and pay for annual leave. Overtime, pay in lieu of annual leave, benefits in kind and payments relating to the termination of employment are specifically excluded.
The definition of “bonus pay” is wide and covers remuneration in the form of money, vouchers and securities, as well as pay relating to profit sharing, productivity, performance or commission. Any remuneration received from share options also count at the time when the options concerned give rise to income tax liability.
Accompanying the data should be a written statement signed by a senior responsible person, such as a director or partner, confirming that the data being published is accurate.
Where should the information be published?
Employers should publish the data on its company website in a manner that is accessible to all employees and the public and it should remain on the website for a minimum of three years. In addition, the data should also be submitted to the Secretary of State via a government sponsored website, details of which are yet to be confirmed.
Are there sanctions for non-compliance?
The Regulations do not contain sanctions; however the reporting conditions mean that it will be easy to identify those in default. It is thought that pressure groups and unions will be keen to name and shame defaulters, particularly if they are a well-known brand or are competing for tendered work. A failure to comply will amount to an “unlawful act” within the meaning of the Equality Act 2006 and could result in the Equality and Human Rights Commission commencing investigations and enforcement action. Ultimately, the main concern for employers will be the adverse effect of bad publicity and the damage this could bring to brand names.
Steps to take in preparation for April 2017
The Regulations place an extensive administrative burden on employers and collating the information will be a time consuming task. Below are some steps which employers can take in preparation:
- Review all contracts of employment, contracts for services and apprenticeships to determine whether or not you have 250 or more employees.
- Consider whether the payroll system utilised by the business will enable a snapshot to be taken, particularly in relation to bonus pay in non-monetary form.
- If there are known disparities, consider why these may exist so that you can manage and present the information in a meaningful context.
- Consider the date on which the data will be published. Employers have until 4 April 2018, however if the data does reveal a disparity, employers may consider publication to coincide with a new equality policy.
- Employers should think about how they will manage the release of information to their employees. Will they be notified of the publication, or will the information simply be available for them to find.
[i] Figures from the Office of National Statistics
[ii] Figures published by Robert Half Ltd