On 6 December 2016, the government published the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, which will require large private sector employers to annually publish gender-based pay statistics. These regulations are due to come into force on 30 April 2017 – effectively starting a 12-month countdown for employers to publish their pay information in April 2018. Employers will then need to produce these statistics each subsequent year and publish the results on the company’s website.
The regulations apply to employers with 250 or more employees in England, Scotland and Wales. According to statistics from the Department for Business, Energy and Industrial Strategy (BEIS), this equates to approximately 7,000 companies, covering just over 10 million employees.
It follows that the regulations do not apply to small and medium-sized enterprises (SMEs) or 99.9 per cent of the companies in the UK (according to BEIS). SME employers should, however, be aware of the regulations and understand what the statistics represent. First, the regulations may be extended to cover smaller businesses in future. Second, the regulations make gender-based pay reporting a key HR concept covering 40 per cent of the employment population, and employers that do not have a reporting requirement should still be up to speed with the requirements for large companies.
Gender pay gap
The gender pay gap is broadly described as the difference in pay between men and women. The reporting regulations require an employer to publish their overall comparative mean and median hourly pay and bonus averages for their male and female employees. Employers are also required to provide information on the proportion of male to female bonus payments and comparative pay quartiles. The regulations are not an extension of equal pay protection or legislation, and do not seek to make like-for-like comparisons based on individual roles. The statistics will therefore be affected by gender differences in part-time employment, early retirement, promotion, seniority and employee retention. An employer’s statistics will therefore show a greater pay gap if, for example, they have a higher proportion of men working in senior positions or women working in part-time roles.
Penalties for non-compliance
The regulations include no specific sanction for those companies that fail to comply with the reporting requirements. Nor is there any requirement to improve figures or make proposals for improvement. The scheme is designed to be self-regulating through the mechanism of embarrassment and negative publicity. A signed statement is required from a senior executive confirming the accuracy of the figures. The lack of sanction will be reviewed, and widespread failure to comply may lead to penalties being imposed.
Considerations for employers
It is interesting to note that no one really knows what ‘good’ pay gap figures will look like. The best marker for an employer at this stage is likely to be to be a comparison with the current estimated national average figures. However, these fail to take into account the specifics of a company and may lack accuracy. Further, the statistics on their own fail to present a narrative or explanation. For example, a high level of imbalance could demonstrate an employer with a very active flexible working policy allowing its employees to work part time if requested. As a society, we know that women are still more likely to work part time to absorb childcare responsibilities, for which it would be unreasonable to blame the employer. The scope for misinterpretation of the statistics should be a concern for companies, particularly given the ‘name and shame’ nature of the scheme.
Because the statistics will not provide this narrative we may see companies going beyond the basic reporting requirements to contextualise the figures. Not only should employers be consulting the payroll team to ensure they have mechanisms in place to calculate the figures, but also the marketing department to help present the figures, and the management team to devise a plan for improvement.