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Is There An Ostrich In The House? (Wyn Lewis)

Is There An Ostrich In The House? (Wyn Lewis)

It’s time to stop ignoring what some employers will be expected to do after the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 come into force on 6th April 2017.

Here’s a back-of-the-envelope guide to the things that employers ought to be thinking about over the next couple of years, but action by no later than 5th April 2018:

What is a gender pay gap?

  • It’s the name given to the statistic showing the extent to which men tend, on average, to earn about 18% more than women for doing the same work.

  • Although the fact of a gender pay gap may not be rocket science, what’s interesting is that the gender pay gap isn’t a one-way gap.

  • Apparently the gap falls to about 9% for full time employees; it reverses to minus 6% for part time workers (where women tend to earn about 6% more than men); and the gap falls to quite a small % when men and women in their 20s and 30s are compared with each other.

  • But a gender pay gap is not an equal pay gap (which is unlawful if men and women are doing the same job) – instead it’s an analysis of different rates of pay between men and women.

Which employers are affected?

  • The regulations only affect private sector and voluntary organisations that have 250 or more employees on 5thApril in a particular year (starting as at 5th April 2017).  
  • The regulations also don’t affect public sector organisations, although similar reporting requirements are to be introduced under different regulations with effect from 31st March 2017.
  • Bizarrely, private and public sector organisations will have different “snapshot” reference points when satisfying their reporting obligations – so there is no clear like-for-like.

Which employees are affected?

  • The concept of “employees” is wide and includes workers and some casual staff, so only excludes agency workers and those individuals who are genuinely self-employed.

  • But the concept of “employee” only includes those who are on full pay. So women on maternity leave, or anyone on sick leave or sabbatical who’s receiving less than full pay, won’t have to be included when compiling the statistics.

What should be done by affected employers?

  • Three pieces of data have to be collected. These are:(1)   the organisation’s gender pay gap % as at 5thApril in a particular year. This information must, however, itself be separated into:  (i)  a general across-the-board figure; and  (ii)  four equally sized bands of “lower, lower middle, upper middle and upper” paid employees (each band being a “quartile”) to see if the gender pay gap differs across an organisation at different levels of seniority;  (2)   the organisation’s gender pay bonus gap over a 12 month period; and   (3)   the proportion of male and female employees who received a bonus in the same 12 month period.
  • This data then has to be published (with a written statement of accuracy – for private sector employers, but with no similar requirement for public sector employers) within 12 months (i.e. by 4th April in the following year) on the employer’s own website and then remain publicly available for three years and must also be uploaded to a (as yet unidentified) government website.

  • Employers are also encouraged (but not required) to publish details of what (if any) action they plan to take to address any gender pay or gender bonus gaps and any explanations or narratives.

  • But group-wide reporting won’t be required; instead, each company in a group will be considered as a separate entity for the purposes of gender pay gap reporting. So some large groups may actually fall outside the regulations entirely – which rather defeats the purpose of reporting.

  • Also there’s no obligation to publish any of this in an employer’s annual accounts or annual report.

What counts as “pay”?

  • Pay includes the gross monthly (if paid per month) or weekly (if paid per week) amount of basic pay, bonuses, allowances, holiday pay and shift premiums, but excludes overtime, expenses, benefits in kind, the value of salary sacrifices and payments made on termination of employment.

  • The complicating factor, however, is that “pay” has to be expressed as an hourly rate. To help do this, there is a six-step procedure set out in the regulations (not here…).

Are there any sanctions for not complying?

  • No (at least, not yet).

  • And although the Equality and Human Rights Commission (in the absence of “teeth” in the actual regulations) can use its existing enforcement powers, the limited resources available to the Commission means that there may be little to fear from it and more to fear from the adverse effects on corporate reputation of the naming and shaming exercise of uploading to a government website.

So will gender pay gap reporting make a difference?

  • There will probably be some effect on employers who routinely tender for public sector work and need to comply with procurement requirements that may favour tenderers with a smaller gender pay gap.

  • There may also be a degree of forum shopping by employees who choose to work for “employers of choice” that make a virtue of equal pay and of diminishing any gender pay gap.

  • There’s also an argument from research undertaken by McKinsey that closing the gender gap will increase GDP.

  • Otherwise it may be a case of waiting to see, after the government reviews the effects of the regulations in a few years’ time, whether there is a need for more (or no) sanctions.

  • In the meantime the absence of sanctions may make the whole exercise a bit of a damp squib.

What employers will need to do, however, is identify what needs to be compiled, for whom, in what part of a group that has several constituent parts, and how to do so. For those who are affected, other guidance and some fact sheets from ACAS about Gender Pay Gap reporting can be accessed here.Some people may take the view that, for the time being, the benefits of these regulations will be felt more by statisticians and accountants than the individuals who are at the lower end of any gender pay gap.