Luke Hutchings, Partner at multi-disciplinary law firm, Taylor Rose TTKW, examines how employers are progressing with the new gender pay legislation.
Last month, The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 for the voluntary sector and private employers came into force. The new legislation requires all employers within these sectors, with 250 or more employees to publish information about the gender pay gap results; Government estimations conclude that this includes almost 8,000 employers.
However, it’s important to remember that the much-publicised issue will also impact businesses that are outside of the current remit of the legislation.
It’s important to understand that the gender pay gap is not just a measure of a business’s compliance with equal pay for equal work regulations. While a breach of the equal pay legislation could be a contributing factor in some organisations, there are several other factors that contribute; the most significant of which is that, statistically, women are not being appointed to senior roles as often as their male counterparts, and are more likely to be found in lower-paid positions or part-time.
The gender pay gap reporting has been on the political agenda for some time; The Equality Act 2010 contained a number of provisions that allowed regulations to be made within its framework. One of these provisions was Section 78, that related to gender pay gap reporting. Rather than bringing Section 78 into force in October 2010, with the rest of the provisions with the Equality Act 2010, the UK Government decided to launch a voluntary initiative instead. In September 2011 a ‘transparency frame’ document was published, called Think, Act, Report; the document set out the measures that businesses should consider in order for them to understand the gender pay gap, before addressing it.
Unfortunately, the initiative wasn’t successful, while 300 businesses signed up, by 2014 only 4 of them had published their pay gap data. This wasn’t the transparency that the Government were hoping for and at the beginning of 2015 they decided to officially put regulations within Section 78 in place.
Addressing and closing the gender pay gap was now high on the agenda, and the commitment was included within the Small Business Enterprise and Employment Act 2015 (this provision was, however, never actually brought into force). Employers were now obligated to consult on the details of Section 78 of the Equality Act 2010 – meaning that they were now legally required to report the difference in pay between male and female staff by 26 March 2016.
Between July and September of 2015, the ‘Closing the Gender Pay Gap’ consultation was run; this addressed the impact of the transparency, other initiatives that could be implemented to close the gap and the compulsory reporting regulations. It was announced in February 2016 that there were just under 700 responses to the 3-month consultation, and 82% of responders agreed that the publishing of such data would incite employers to actively act in ways that would close the gender pay gap.
The legislation requires employers in the aforementioned sectors to report, but there is no specific guidance for group companies; the figure is understood to relate to the employer’s number, rather than a cumulative figure of all staff employed by the entire group. The Government are aware of the confusion and the Government Equalities Office has acknowledged that they will need to consider and clarify the regulations for group companies. They have also committed to providing a tighter definition of ‘employment’ as there is misunderstanding if specific employees on, an apprenticeship contract for instance, are included.
By 30th April 2017, organisations were required to the number of employees, their gender, weekly hours, along with their pay and bonus pay, this will enable the appropriate calculations to be made. Information that is required to be published each year thereafter, is to include the difference in mean, median and bonus pay, the proportion of male and female employees that received bonus pay in the 12 month period and the number of male and female employees that are employed the quartile pay bands.
These figures are somewhat less detailed that those set out in the Think, Act, Report Initiative; for example, employers are not required to set out the number of male and female employers in each job role.
Currently there are no specific consequences laid out in the draft regulations for non-compliance, and this has been heavily criticised. However, the argument to the lack of sanction is that in response to the consultation, it was thought that a penalty such as a fixed fine might leave employers choosing to pay the fine rather than implement active strategies.
It is currently still unclear as to how the Government is going to monitor the compliance of organisations, but it is thought that the publicised information will incentivise them to comply. The media, trade unions and of course, employees are like to be proactive in checking the data, and of course pressure between competitors will play a part. Those companies that are found to have large gaps between gender pay may find themselves the subject of damaging publicity, threatening brand image and ultimately, their profits.
Of course, employers are concerned that the gender pay reporting is going to increase equal pay claims and complaints of sexual discrimination – but the spotlight on the subject is an opportunity for businesses of all sizes, to be progressive and proactive in both understanding and tackling the gap.
Smaller businesses are able to do this by assessing their payroll systems; it’s reported that 62% of businesses in the UK are able to calculate their gender pay gap information using their present HR data. It’s also best practice to understand the composition of your workforce, this will enable employers to identify any specific areas where gaps are stemming from.
All businesses should now be considering which steps they can take to have the appropriate data or systems in place, analysing this data early on will enable employers to strategically minimise their gender pay gap. It’s likely the Government will push for further action the enforcement of formal quotas across all UK businesses.