The government has now published final regulations (in draft) following its earlier consultation, setting out how employers with 250 or more employees must report on their gender pay gap (Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (GPR), here)). The government has indicated that explanatory guidance will be published in due course.
The GPR is a succinct set of regulations with a big potential impact for employers.
There are a number of key departures from the original proposals which employers will need to factor into their reporting obligations.
Snapshot date moves from 30 April to 5 April each year
The date on which a gender pay snapshot must be taken each year has moved from 30 April to 5 April each year.
Wider definition of employee used to trigger disclosure obligation
To ascertain whether or not an employer has 250 or more employees on the snapshot date, the definition of “employee” no longer refers to employment under a contract of employment or a requirement to “ordinarily work in Great Britain”.
Instead, “employees” are simply those who are “employed by the “relevant employer” on the snapshot date” (i.e. 5 April in the year to which the information required to be disclosed relates). The guidance indicates that the definition of employment includes employment under a contract of employment, a contract of apprenticeship, or a contract personally to do work (referring to the section 83 Equality Act 2010). Partners in firms and members of a limited liability partnership are expressly excluded.
Each company within a group will need to publish its own gender pay information. There is no requirement to aggregate employees across group companies together.
Six disclosure requirements
The GPR provides for six disclosure requirements – information on the median bonus pay being a new addition from the earlier consultation. For 2017 and each subsequent year, relevant employers must publish the following information:
- the difference between the mean hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees;
- the difference between the median hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees;
- the difference between the mean bonus pay paid to male relevant employees and that paid to female relevant employees;
- the difference between the median bonus pay paid to male relevant employees and that paid to female relevant employees;
- the proportions of male and female relevant employees who were paid bonus pay; and
- the proportions of male and female full-pay relevant employees in the lower, lower middle, upper middle and upper quartile pay bands.
Performing the necessary calculations
The GPR sets out how the calculations for each disclosure requirement must be performed in a series of step-by-step instructions; presumably in an effort to avoid some of the confusion generated by the numerous ambiguities in the initial draft regulations.
The GPR introduces some notable points of clarification:
- Data relating to a relevant employee does not have to be included, if the employee is employed under a contract personally to do work, and the employer does not have, and it is not reasonably practicable for the employer to obtain, the data.
- Definitions of ordinary pay and bonus pay have been revised and made more specific.
- The obligation to disclose gender differences in the mean and median hourly rate of pay (which includes ordinary and bonus pay) is limited to “full-pay” relevant employees employed on the applicable snapshot date. It excludes employees who, during the relevant pay period used to calculate hourly rates of pay, are being paid at a reduced rate or at nil, as a result of being on any of the following: annual leave; maternity, paternity, adoption, parental or shared parental leave; sick leave; or ‘special leave’.
- To assist employers, the obligation to disclose the proportion of male and female employees according to quartile pay bands is set out in a series of steps; quartiles being identified by ordering the employees by hourly pay rates and then splitting into four equal sized groups (quartiles). If a number of employees receive the same hourly rate of pay and some would fall within one quartile, whilst the others would fall within another, the GPR require that an employer should so far as possible ensure the relative proportion of men and women is the same in each pay band.
- As before, the difference in mean bonus pay and the median bonus pay looks back at relevant bonus payments made in the period of 12 months ending with the snapshot date. It captures all “relevant employees” employed on the snapshot date (i.e. not just “full-pay” but also those who may be on reduced or nil pay). The first snapshot taken on 5 April 2017 will therefore look back at bonus payments made since April 2016.
We shall update our quick reference guide with further details on the definitions and calculations required to be performed. Please speak to your Osborne Clarke contact for more details.
Publishing gender pay gap data
For relevant employers who must take a gender pay data snapshot on 5 April in a particular year, the data must then be published “in manner that is accessible to all employees” and the public, on the company’s website, accompanied by a written statement, within a period of 12 months (i.e. no later than 4 April of the subsequent year). So relevant employers who must take a gender pay snapshot on 5 April 2017 must publish the required data by 4 April 2018. The written statement must confirm the information is accurate, and be signed by an individual designated by the regulations. The data must remain on the employer’s website for at least 3 years from the date of publication, and must also be published on a website designated by the Secretary of State, (details of which are still awaited).
Failure to comply with an obligation under the regulations will be an ‘unlawful act’ within the meaning of the Equality Act 2006, which empowers the Equality and Human Rights Commission to take enforcement action. Employers ignoring their duty to disclose this information, also risk damaging their brand reputation as well as having a negative impact on attracting and retaining talented employees unhappy with the business’ approach to gender equality.
There is no legal requirement for data to be accompanied by any additional narrative (over and above the statement referred to above), but for many employers an additional narrative will be an opportunity to explain any gender pay gap reported on that could have a number of non-discriminatory causes, and is not necessarily indicative of an equal pay problem in the business.
What are the key questions for employers to consider now?
It is anticipated that the regulations will come into force on 6 April 2017. Employers who may be caught by these new legal obligations must now take steps to understand the obligations on them, plan how they will comply, and so far as possible, audit and address any existing problems. We shall be updating our gender pay quick reference guide and our employment experts will be happy to talk to you about these new requirements and also discuss how you can protect your data.
Key questions to plan and progress now include:
- How will you identify “in scope” employees and pay data?
- What will be the impact of bonus awards being paid from this April 2016 and pay awards made in the run up to 5 April 2017?
- How will you calculate and analyse your gender pay gap?
- Should you do a “dry run” using data from 2015/16?
- Will you rely on legal privilege to protect your data?
- What steps can you take to close any gender pay gap?
- How will you report your data?
- Who will be responsible for that report in your business?
To help guide employers through these steps – ensuring they understand how their employees’ pay data will be used, analysed and reported on in complying with gender pay reporting – Osborne Clarke recently hosted a webinar looking at gender pay reporting in more detail and how businesses may want to use legal privilege in their fact-finding process. You can watch the webinar here (but note the change to the snapshot and reporting date as set out above).