On 6 April 2017, the new Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 come into force and are expected to affect nearly 8000 employers.
What is it about?
The Regulations require all employers with 250 or more employees (as at 5 April each year) to publish prescribed statistics/information relating to the pay of males and females in their employment. The results will need to be produced annually on one "snapshot" date (although the bonus information will cover the whole year).
In the private sector, the first Gender Pay Reports will have to be published by no later than 4 April 2018. They will need to be based on hourly pay rates as at 5 April 2017 and bonuses paid between 6 April 2016 and 5 April 2017. In practice employers will publish much earlier than 4 April 2018. Public sector organisations will have to publish no later than 30 March 2018, based on hourly pay rates as at 31 March 2017 and all bonuses paid between 1 April 2016 and 31 March 2017.
According to the draft regulations, employees for these purposes are anyone who "works under a contract of service, a contract of apprenticeship or a contract to do work personally". This will include zero hours’ workers, apprentices and some contractors. It will include executive directors. It may include non-executive directors too. The draft regulations currently don’t include Partners in partnerships.
What do employers have to report on?
There are detailed requirements on how you work out pay but broadly it includes information relating to ordinary pay and bonus pay.
Notably, employers who are part of a group structure, will need to individually report, in other words, each employer with 250 employers or more in any group will need to report its data in line with the Regulations. There is presently no legal requirement on smaller employers but they will be encouraged to do so. We expect this to change and, as with pension auto-enrolment and other employment changes, there may be a staged introduction for those under the 250 threshold.
The gathering of the information to be reported is not entirely straightforward. However, at its most basic level, employers need to report 6 types of gender pay data. These are:
• The difference between the average hourly rate of pay of male full-pay employees and the average of female full-pay employees (Mean Gender Pay Gap)
• The difference between the median hourly rate of pay of male full-pay employees and that of female full-pay employees (Median Gender Pay Gap)
• The difference between the average bonus pay paid to male employees and the same but applied to female employees (Mean Gender Bonus Gap)
• The difference between the median bonus pay paid to male employees and that of female employees (Median Gender Bonus Gap)
• The proportions of both male employees and of female employees who are paid bonus pay (Proportion of men and women getting a bonus)
• The proportions of male and female employees in the lower, lower middle, upper middle and upper quartile pay band (Proportion of men and women in each of four pay quartiles)
What do I need to do with the report?
The Gender Pay Report setting out this information must be signed, usually by a director. There are some rules relating to how and where publication should take place but importantly it must be published on the company website by April 2018 and be uploaded to a Government website (yet to be operational). The Employers can add an explanation or commentary if they wish, but that isn’t compulsory. Although if the report reveals some unpleasant statistics, it is likely that the Company will want to offer some explanation (we would recommend taking professional advice).
What are the consequences of not complying?
The natural question for readers will be - what happens if we don’t comply? The full extent of the enforcement powers are yet to be confirmed however we do know that it could result in an investigation, the issue of an unlawful act notice, the requirement to produce an action plan for change, and/or the Equality Commission obtaining a court injunction against the employer.
In our opinion, the enforcement consequences for failing to comply may be less of a concern than the reputational risk and wider effects that may arise from non-compliance. Even now, most employers are fairly secretive about what they pay their employees so this does naturally lead some employees to question what they are earning and whether it is fair. As a result, we would expect many employees to look up the report on their employer’s website. Naturally, an unfavourable report is highly likely to create issues and potentially claims (or worse still multiple claims).
However, there is a wider and far more subtle impact which employers should not ignore. The Trethowans Employment and Immigration Team carried out a survey and produced a Whitepaper on the issues facing employers into 2020. The report surveyed owner/managers, HR professionals and employees separately to get a full 360 degree opinion from the three key stakeholders in the ‘Employment Triangle’. The result of our survey was that all three groups confirmed that the reputation of their employer was the most important factor in deciding whether to work for their present employer – we were surprised too!
Turning this finding into a practical issue related to Gender Pay reporting, it appears to us that those companies who do not report or produce reports littered with inequality could find recruitment and retention more challenging. Faced with a widely publicised skills shortage facing employers (a further projected issue highlighted in our Whitepaper), reputation for being a fair employer will become increasingly important moving to 2020.
What should you do now?
If you are or you are likely to be an employer of 250 employers or more people from 5 April 2017, do an assessment as soon as possible. See what findings you produce and if they are not favourable, you need to work out quickly how you will address the issue. We are happy to help you but we will say; hope is not a strategy!