Blog: A big loophole in Gender Pay Gap reporting

Luke Menzies, Director and Specialist Employment Lawyer at Menzies Law

There are quite a lot of things we don’t yet know about the Gender Pay Gap figures that all larger employers are shortly going to have to calculate and publish.  The long-promised ACAS guidance on how precisely to calculate and publish continues to tease us with its own lack of publication and I must admit that I’m not feeling confident that it will answer all the outstanding questions in this first year of mandatory GPG publishing.

During a recent GPG awareness session that we co-presented with PwC, both their numbers geek and ours (and I should add our own geek happily proclaims her geekhood) agreed that there are a large number of as yet unanswered questions about some of the methods of calculating the notional hourly rate, which is what sits at the heart of the GPG calculation.

While we wait with baited breath for the fun of the (hopefully) forthcoming ACAS guidance, it’s become apparent to me, as I speak to more and more employers about how they are intending to deal with GPG reporting, that there’s a rather large loophole in the GPG regulations. And it’s one that creates a bit of a nonsense of the idea of there being a proper legal duty on larger employers to report their data so that it can be compared in any meaningful way with similar organisations.

Loophole

The problem lies in the fact that only companies (or other bodies) with 250 or more employees are required to publish their GPG figures.  It’s not that threshold number itself that’s problematic, but the fact that it is an absolute rule, with no nuances.  In particular, it fails spectacularly to take account of the fact that many larger employers operate within a group structure, often with several group companies having under 250 employees.  And yet there is no provision within the legislation for group reporting.

Picture this…

Imagine the following situation, which I think is common.  In a certain sector there are two large employers, each with 2,000 employees.  They are rivals and everyone regularly compares them in all sorts of ways.  You would imagine that both of them would definitely have to publish their GPG.  But while one of these companies operates through a single company, the other has a group structure comprising 14 limited companies, and none of these companies happens to employ 250 or more employees.  So the result is that the first business must publish its GPG annually but the latter business doesn’t have to – not at all.

Changing the scenario just slightly, imagine a business that employs 500 staff through its main group company, but its sales force of 100 is in a separate company and its directors are in a holding company employing just 10 people.  The business’s overall GPG is appalling – imagine the gap is around 40%.  However, that is something that will never be known by either its staff or anyone externally because of the way the GPG rules currently work.  Let’s assume that the GPG within the main company is fine, viewed in isolation, and that the problem with pay equality within this particular business lies with the pay of the sales force and the directors.  But because the two additional companies that employ these two particular teams aren’t required to either publish their own data or – more sensibly – required to include their data within a group report (like group accounts), this business’s very problematic and embarrassing GPG figures can be kept a secret.

My view is that this is a big mistake, and quite possibly an oversight, on the part of those who wrote the rules.  It’s definitely something for the Government Equalities Office to take into account in its first review of the GPG reporting regulations.

If you agree or disagree with me, I’d love to hear from you.

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Luke Menzies, Director and Specialist Employment Lawyer at Menzies Law