Background

According to the Government, the gender pay gap is currently at the lowest it has ever been, but statistics from ONS suggest that men are still paid around 20% more on average than women in the UK.

Amy Cunningham, of Cunningham Legal (a boutique law firm that provides employment law and HR services to both companies and individuals), explains that gender pay gap reporting is currently not compulsory. However, in February 2016 the Government published draft regulations (the Equality Act 2010 (Gender Pay Gap Information) Regulations 2016) that make gender pay gap reporting (ie making public the average pay and bonuses of male and female employees) mandatory for organisations with 250 or more employees.

Following a period of consultation on the draft regulations, which ended on 11 March 2016, the results of the consultation will be published this summer, and the Regulations are then likely to come into force on 1 October 2016.

Which employers will be covered?

The new obligations will apply to private and voluntary sector employers in England, Wales and Scotland, with 250 or more employees. The final Regulations are likely to clarify the scope of “employees”, as the intention is apparently that LLP members and some self-employed contractors will be included.

The consultation document also states that the Government intends, in due course, to extend the Regulations to public sector employers.

What must be published?

The Regulations will require employers to publish the:

  • mean pay gap (ie the difference in the average pay of male and female employees)

  • median pay gap (ie the difference in the pay of the middle male and middle female earner)

  • numbers of men and women working within salary quartiles

  • mean bonus gap (ie the difference between the mean bonus payments paid to men and women) in the preceding 12 months

  • proportion of male and female employees that received a bonus in the preceding 12 months.

“Pay” for the purposes of the Regulations includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances).

The Regulations will require employers to calculate gender pay gaps using data from a specific pay period every April from 2017. April has been chosen in order to avoid seasonal fluctuations in an organisation’s workforce.

Employers must then publish their gender pay gap information on their website, accompanied by a written statement confirming that the information is accurate. It must then remain on their website for a minimum of three years. It will also be published on a government-sponsored website.

Employers will also have the opportunity (although it is not mandatory) to publish a narrative, explaining any pay gaps and setting out what remedial action they intend to take in line with the guidance published alongside the Regulations.

Publication timetable

The Regulations are widely expected to come into force on 1 October 2016, which will give employers six months before they have to take their first snapshot (in April 2017), and 18 months before they must publish their figures (in April 2018), so there will be a lead in time of 18 months to publish the required information for the first time. The information must then be published annually thereafter.

Penalties and risks

According to the consultation document, a database of complying employers will be built up as employers link their published information to a government-sponsored website, with examples of compliance and non-compliance identified. The Government does not intend to create any additional civil penalties in the Regulations at present, but will keep this under review.

However, it is likely that the negative publicity and reputational damage associated with non-compliance will be far more damaging than any financial penalties and may have an associated impact on recruitment and retention, not to mention an increased risk of equal pay claims. That said, there has been much criticism of the Regulations for failing to include any enforcement mechanism or sanctions for non-compliance (including where published information is inaccurate or misleading).

To highlight where the gender pay gap needs tackling most, the Government will publish the pay gap by sector in league tables that will allow women to see where the gap is being addressed and where more action must be taken. It remains to be seen whether this will deter women from exploring opportunities in areas where there is a wider gender pay gap, and some critics believe this could hinder meaningful change.

Actions for employers

  1. Start planning for pay gap reporting now. Take action as soon as possible to introduce new systems (or review and update existing systems) to enable analysis of gender pay gaps.

  2. Where pay gaps become apparent, consider what explanation or justifications can be given, and what action can be taken to narrow the gap.

  3. Consider engaging legal support, particularly in light of the reputational and financial risks of potential equal pay claims.

Last reviewed 6 June 2016