In April 2017 we wrote about the introduction of new law requiring certain organisations to publish information about their gender pay gap. Almost a year on and the first reporting deadline is fast approaching. All private and voluntary sector employers with 250 or more employees must report on a range of gender pay gap information by 4 April 2018. This report must then be published annually.
So far, only 8% of employers required to publish a report have done so. However, the pay gaps at these employers have been significantly better than what had been expected by the Office of National Statistics. This suggests that those with less than impressive results have yet to publish and we may see a flurry of less favourable reports as the deadline approaches.
What is the gender pay gap?
The gender pay gap is a calculation which shows whether there are differences in the pay between male and female employees. If the calculation produces a positive figure, this would indicate that the average pay for men is more than that for women. Conversely, a negative figure indicates that women’s average pay is more than men’s.
What must the report contain?
The gender pay gap report must contain the following information:
- overall gender pay gap figures for relevant employees, calculated using both the mean and median average hourly pay;
- the amount of men and women in each pay band to show how the gap differs at different levels of seniority;
- information on the bonus gap between the mean and median bonus pay of men and women over a 12 month period;
- the proportion of male and female employees who received a bonus in the same 12 month period; and
- a written statement confirming that the information is accurate signed by a senior individual at the company (usually a director).
Companies can include a narrative explaining any pay disparities revealed in their report. Uber produced a narrative alongside its gender pay gap report which explained that male drivers earn more than female drivers because they stay with the company longer which results in an increase in the value of their pay. The narrative also stated that 77% of women drivers quit Uber after six months compared to 65% of male drivers.
Publishing a narrative along with the gender pay gap report allows an employer to show that the regulations are being taken seriously and that it is not simply being treated as a compliance exercise. It would benefit an employer if the narrative demonstrated the culture within the organisation and its commitment to diversity and equality in the workplace. An action plan should also be included, outlining how new initiatives may help to close the gap.
The report must be uploaded to a government website and also be made publicly available on the publishing company’s website for three years.
What is an employee?
The gender pay gap regulations apply to ’employees’, which includes any person who has a contract of employment, any workers and agency workers with a contract to do work or provide services and self-employed individuals who personally perform work.
Only those employees receiving ‘full pay’ are included in the calculations so employees on maternity leave or sick leave are excluded.
Although there are no enforcement provisions or sanctions for non-compliance in the underlying legislation, the Government has previously said that the Equalities and Human Rights Commission would be able to enforce any failure to comply through existing powers under the Equality Act. The Commission has been consulting on its enforcement strategy and its draft proposals include a range of escalating measures, from informal engagement to court orders and unlimited fines.
The media and misconceptions
The media have been keen to focus on the publication of gender pay gap reports by large organisations with the BBC in particular being a target for scrutiny and criticism.
A common misconception, exacerbated by the media, is that the gender pay gap and equal pay are the same thing but this is not correct. The concept of equal pay for equal work has been a legal requirement for almost 50 years. The new requirement for gender pay gap reporting considers rates of pay regardless of job role. So a company may have a gender pay gap if a majority of the top jobs are taken by men, despite the same company paying male and female employees the same amount for similar roles.
Gender pay gap analysis will often reveal that women are misrepresented in more highly paid roles. A gender pay gap does not necessarily indicate that an employer is paying men more than women, although this could contribute to the gap.
Employers should look to include an explanation of this distinction in the reporting narrative so that the readership, likely to be the employees, can understand the reasons for the differences in pay.
Time to publish
As the deadline approaches employers should be compiling their gender pay gap figures. If they reveal a significant gap this will need to be carefully explained in the accompanying narrative . Larger companies, or those in the public eye, should expect to be scrutinised in the media if their pay gaps reflect a negative approach to equality.
This blog post was written by Hannah Serene. For further information, please contact:
Sophie Brookes, partner, Corporate
T: 0161 836 7823