Government reforms (1): Gender pay gap

What do we already know?

We updated you in our February Newsflash Gender pay gap – mandatory reporting that the previously voluntary approach to pay reporting is to become mandatory in the next 12 months for organisations employing more than 250 people. These employers will be required to publish pay information to show whether there are differences between the pay of their male and female employees.

What’s new?

The Government has published a Consultation document (available here) seeking views on the key points of the new mandatory reporting. It is reported that a further consultation document covering the finer detail of the regime is likely to be published later this year. The Consultation closes on 6 September 2015 and regulations bringing in the new law are to be introduced by the end of March 2016. However, there is to be a delayed commencement process to allow time for employers to prepare.

Guidance on the “Think, Act, Report” framework has also been re-published. This is aimed at encouraging voluntary action by employers to identify, and act transparently to address, gender pay gap issues. This Guidance is available here.

The Consultation document contains information about the gender pay gap, its causes, the progress that has been made so far and on-going work in this area. It asks for feedback on, among other things:

• whether publication of gender pay information will encourage employers to take action that will help close the pay gap, whether there are any associated risks or unintended consequences, and whether there is anything that needs dropping or modifying;

• when the obligation should come into force (by reference to a specific date or to a company’s year-end) and whether it should be phased in, perhaps for employers with between 250 and 500 staff;

• where information should be published (for example, on the employer’s website);

• how frequently it should be published (the suggestions are every 1, 2 or 3 years);

• how easy it would be for employers to publish the different levels of information being considered by the Government (one overall figure for their workforce, separate figures for full and part-time employees, or figures broken down by grade/job type);

• whether there should be an option or obligation to include contextual information about the figures to explain any pay gap and set out remedial action the employer intends to take (although there is no obligation to take any); and

• whether the obligation should apply to all employers with at least 250 employees (which suggests that a higher threshold may be considered). The definition of “employee” will cover workers “under a contract of employment, contract of apprenticeship or a contract personally to do work”.

Comment: It will come as a relief at least that the Consultation envisages a delayed commencement process to allow time for businesses to prepare. In order to capitalise on this period, large employers would be advised to carry out an audit of their current position. This will help manage the potential risks of publication, such as reputational harm and equal pay claims. Such audit will allow time to rectify any disparities and for any audit documents to be created for the purposes of taking legal advice, so as to benefit from privilege protection from disclosure.