Gender Pay Gap Reporting: What employers need to know

Our employment and Corporate lawyers, join forces to explain how employers should effectively handle gender pay gap reporting and ensure their company is ready for the 2018 regulations.

Statistics indicate there is a gender pay gap of 18.1% overall (9.4% for full-time employees). In a bid to tackle this problem, and to promote pay transparency, with effect from April 2017 the Government has introduced mandatory annual gender pay gap reporting for businesses employing 250 or more employees. 

What needs to be published?

By 4 April 2018 employers covered by the Gender Pay Gap (“GPG”) Regulations will need to publish both on their own website and a specified government website six different metrics:

  • the difference in (a) mean and (b) median hourly pay between men and women;
  • the difference in (a) mean and (b) median bonus pay;
  • the proportion of male and female workers receiving bonuses; and
  • the proportion of male and female workers falling within each of the four quartile pay bands.

The figures will be as at a particular ‘snapshot’ date - the 5th April each year, and need to be published by 4 April the following year. The process will need to be repeated annually, with figures retained online for three years.

Employers will also be able to provide a voluntary narrative report to explain any pay gaps and to set out any intended remedial steps to be taken. Employers should consider doing this, as the bare figures are unlikely to tell the whole story. They should give careful thought to what they say, particularly as this is not a simple issue and there may be numerous relevant factors in play, differing according to the employer’s industry, not to mention the ethnicity, social background and age of its workers. Those which do have a pay gap (statistically likely to be most employers) will want to put forward any explanations that may at least partially explain the differences. Those employers whose figures are positive will no doubt want to advertise this fact.

Who counts?

Whether an employer falls within the scope of the Gender Pay Gap Regulations is not as straight forward as it seems. The definition of ‘employee’ used in the legislation is wide and may cover consultants, zero-hours, casual workers and apprentices. Those who are truly self-employed need not be included. In addition, the figure of 250 employees is a total headcount, so employers should include all employees within their calculations, no matter how few hours they work.

Each company in a group is treated separately, so some group companies may meet the threshold, whilst others may not.

What are the sanctions for non-compliance?

Perhaps surprisingly, the Gender Pay Gap Regulations don’t have a formal enforcement mechanism, which in turn has led to criticisms as their likely effectiveness. However, it has been reported by the Young Women's Trust that 84% of women aged 16-30 state that they would consider an organisation’s gender pay gap and 80% say they would compare it with other organisations when considering new employment. It would therefore be unwise not to take the issue seriously.

Next steps

Employers should:

  • check whether they fall within the provisions of the Gender Pay Gap Regulations;
  • Familiarise themselves with the data to be provided and the terminology used by the Regulations;
  • Ensure that the data is collected in good time, and if it’s not available look to implement suitable software to collate it;
  • Give serious consideration to the narrative that they will publish alongside their figures, which will hopefully help to minimise the potential for adverse publicity and reputational damage.

In conclusion

Gender pay gap reporting is undoubtedly a step forward, but the reported response to the legislation highlights legitimate concerns surrounding how the requirements may affect company reputation, share value and, importantly, recruitment of key personnel. By not engaging with the gender pay gap reporting process employers may risk their chance to win new business as potential new customers are more likely to respond positively to a company that shows a genuine interest in this topic.

Any company affected by the requirements should consider the implications of not taking part and, if required, obtain professional advice as to the correct way to implement the appropriate internal structures.