The Small Business and Enterprise Act 2015 obliges the Government to adopt regulations requiring mandatory gender pay gap reporting by March 2016. The Government has already launched a consultation which will close on 6 September 2015 and new regulations are expected to take effect by March 2016. It is thought that the first reports will be published in 2017.
Who will be required to report?
The Conservative Manifesto pledged to require companies with more than 250 employees to publish the difference between the average pay of their male and female employees.
However, the Government’s consultation invites comment as to whether the 250 employee threshold is appropriate. It may be the case that reporting obligations are restricted to employers of larger organisations in the early years.
What information will have to be reported and when?
It is unclear at the current time what information will have to be reported.
Whilst on the face of it, it may be attractive for an employer to only have to report one overall gender pay gap figure that states the difference between average earnings for men and women, employers will want to place the headline figure in context to avoid damage to their reputation. Employers will want to be able to explain the reasons for the pay gap, put the figures into context and demonstrate how they will reduce the gap by adopting equality initiatives.
The government is also consulting on whether or not separate gender pay gap figures should be published for full time and part time employees and whether or not the rules should go further and require the employer to report the difference in average earnings for men and women by reference to grade or job type.
If the requirement is to report figures by grade or job type, there is a concern that reporting an average figure may not be a true reflection of equal pay for equal work. Employers will want to be able to produce additional information to explain the figures to avoid an inaccurate presentation of its pay and values.
As to how often the information is to be reported, this is again a matter for consultation. The Government’s proposal is for information to be published annually.
Where will the information be published?
At the current time, there is no information save that the consultation paper asks whether or not the new regulations should stipulate where the information should be published such as a prominent place on the employer’s website.
Compliance and Fines
Again, the matter of enforcement is subject to consultation; however, it is expected that the Equality and Human Rights Commission will monitor compliance and fines imposed will not exceed £5,000. However, it will be relatively easy to identify employers who do not comply with the obligations thus inviting adverse publicity and attention. In particular, employees may adversely question the reasons why their employer has chosen not to report the required information.
For a number of reasons it is likely that the figures to be reported will not show all employers in a positive light. The Telegraph has reported that the UK’s Office for National Statistics show that an average woman earns around 80 pence for every £1.00 earned by a man.
Furthermore, there will be many private sector employers who do not have in place comprehensive pay grades and scales for every role in their organisation. Comparing “like for like” may be difficult and distort the figures.
Our experience, gained from defending equal pay claims for private sector employers, is that it is often the case that job descriptions do not fully reflect the role that a particular employee undertakes or adequately reflect the level of management or responsibility that the individual undertakes when compared to others in the organisation who are paid less.
Reporting adverse figures may have a damaging effect on the employer’s reputation making it more difficult to engage and retain staff. There will also be implications for tendering for work, especially when tendering for work with a local authority, and of course the risk of equal pay claims. Any compensation payable may be significant as an employee can potentially claim pay going back six years.
You need to prepare
There is time for you to make changes before you are required to report your organisation’s gender pay gap. You should consider:
- Assessing and reviewing your organisation’s pay and benefit arrangements;
- Identifying potential areas of concern and the reasons for any differences in pay and benefits;
- Taking steps to address identified areas of concern; and
- How your information will be reported when reporting becomes mandatory.
You should also consider using lawyers to carry out the assessment so that you obtain legal privilege from disclosure of this information. The results of an assessment may be potentially harmful to an organisation and potentially extremely useful to an employee considering an equal pay claim.
How can Taylor Walton help?
We can carry out an assessment to identify gender pay gaps in your organisation and provide you with a report identifying areas of risk. This report would be a confidential legally privileged document.
In addition, we would highlight potential arguments to support any pay differences and make recommendations for change to minimise risk.
As a result of working with employers in the private sector over many years, we understand that this exercise may not be relatively straightforward in all areas of an organisation. Work may be required in the first instance to group and classify roles and to make appropriate changes to job descriptions. Our practical way of working with our clients can help your organisation plan for this mandatory change.