Government reforms (2): Gender pay – mend the gap!

We updated you in our February Newsflash that the Government has published its response to its first consultation on the new gender pay reporting requirements and that it has also issued a second consultation with draft regulations which set out the framework for the new gender pay reporting requirements. The only consultation question is whether any modifications should be made to the draft regulations.

We promised you further detail on the framework set out in the draft regulations, so here it is…

Who does this affect?

Organisations with 250 or more employees. The draft regulations suggest that the trigger will be 250 per individual limited company, corporation, LLP, etc. Therefore if you are in a group of companies with a total of 250+ employees but there not 250+ in any one individual company, you will not be subject to the GPG reporting duty at all. If, say, only one of your group companies has 250+ employees within it, then only that particular group company need publish the GPG report.

(However, do not let that technical detail distract you from the fact that an employee employed within a group structure can still bring an equal pay claim using a comparator in any one of the other group companies, so when assessing your overall GPG legal risk, you need to look at all of your group companies, no matter how small some of them may be.)

What are the requirements?

Qualifying organisations must publish the following gender pay gap statistics about their British employees:

• the mean and median overall gender pay gap figures for your organisation;
• the bonus pay gender pay gap for bonus payments over the preceding 12 months; and
• the number of men and women working across salary quartiles.

It will be a relief to know that very detailed breakdowns won’t be required, such as by full and part-time employees or by grade/job.

To help explain any pay gaps they may have, organisations will also be able to include additional narrative that provides context and sets out any actions the organisation intends taking. If the pay gap is particularly high then organisations may choose to provide more detail (i.e. broken down by hours and/or job grade) where this would help to present a more favourable picture.

International organisations will be pleased to know that the legislation is intended to capture just the British workforce – the draft regulations will apply to employees who ordinarily work in Great Britain and whose contracts of employment are governed by UK legislation.

The GPG report must be published on the employer’s website every year and left there for at least three years. It must also be uploaded onto a special website which the Government will operate.

No doubt that website will make your GPG report very easy to find and comparable against all the other employers’ data.

What is “pay”?

The draft regulations provide that “pay” includes: basic pay; paid leave; maternity pay; sick pay; area allowances; shift premium pay; bonus pay and other pay (including car allowances, standby/on call allowances, clothing allowances, first aider and fire warden allowances).

However, pay does not include: overtime pay; expenses; the value of salary sacrifice schemes; benefits in kind; redundancy pay; arrears of pay and tax credits.

Pay must be calculated before deductions for PAYE, NICs, pensions, student loan repayments and any voluntary deductions.

What is “bonus pay”?

The draft regulations provide that “bonus” includes:

• profit-sharing, productivity, performance and other bonus or incentive pay, piecework and commission;
• long-term incentive plans or schemes (including those dependent on company and personal performance); and
• the cash equivalent value of shares on the date of payment.

When do we need to do this?

• 1 October: GPG regulations in force;
• 30 April 2018: the employer must have publicly reported their GPG information. This can be published on a date of the employer’s choosing, provided it is done by 30 April 2018.

Employers must then subsequently publish their latest GPG statistics every 12 months.

This timetable is intended to help employers get ready for the new regime and introduce any new systems or processes they need to capture the relevant data and analyse their gender pay gaps.

What happens if we do not comply?

The Government intends to:

• run periodic checks to assess for non-compliance;
• produce tables by sector of employers’ pay gaps;
• highlight employers who publish particularly full and explanatory information; and
• ‘name and shame’ employers who fail to comply.

The Government has confirmed that civil penalties will not currently be introduced, but this will be kept under review in the light of rates of compliance by employers in the first few years of implementation. We believe it is quite likely that, over time, the Government will decide to give enforcement powers to a body, perhaps HMRC.

Further, the Equality and Human Rights Commission will be able to investigate employers who fail to comply.

What should we do now?

If you have 250+ employees but you haven’t already started to take action, it’s definitely time to ‘mend the gap’.

The fact that we now know the legislation will be coming into force in October does not mean that you should be simply waiting to see what will happen. You need to know your gender pay gap now, so that you can consider and plan what to do about it. When the likely deluge of equal pay claims starts, you don’t want to be caught with your metaphorical trousers round your ankles – you will want to already know your risk areas and already have taken steps to close high risk gaps and plan your communications, internal and external.

Doing nothing at this stage is really not an option, we suggest!

We are keen to help you prepare, plan and take action to know and reduce your equal pay risks through our Gender Pay Gap Audit & Advice service, delivered in association with Smith & Williamson, the national accountancy firm. Our equal pay legal experts are partnering with their pay & reward experts to provide you with a comprehensive solution to your need to audit, identify and deal with the legal, financial and risk management implications of your gender pay gap.

For more information on our GPG Audit & Advice service please read on or contact our Director, Luke Menzies.