What mandatory gender pay reporting means for employers
Defaulters likely to be named and shamed
New regulations requiring larger employers in the private and third sectors to publish details of their gender pay gap are due to be in place by March 2016. But many employers will be keen to start getting their houses in order now before any difference between the pay of male and female employees is exposed to public scrutiny.
The new regime, which will come about as a consequence of the Small Business, Enterprise and Employment Act 2015, will apply only to organisations in Great Britain with 250 employees or more. It will not apply to most public authorities - those listed in schedule 19 of the Equality Act - which are required to comply with the public sector equality duty and, therefore, already have broader equality obligations than most other employers.
Further details of the new requirements, including precisely what will need to be reported, where and how frequently, will be determined following a public consultation. This is expected to start over the summer and to last for three months, with a further consultation likely once the draft regulations are published.
The options likely to be considered range from giving employers a free rein to choose what information about their gender pay gap they will report to introducing more prescriptive rules. The regulations could, for example, require employers to reveal the percentage difference between men’s average hourly pay and women’s average hourly pay, as one figure for the whole workforce. Although this would make the task of gathering the data needed to comply with the regulations less onerous than if pay data has to be broken down, for example, by pay grades, a raw figure of this kind can, at best, be meaningless and, at worst, misleading.
Many employers will be concerned that highlighting gender pay differences could leave them exposed to equal pay claims or damage their reputation for treating employees fairly. It will certainly bring increased transparency and scrutiny of the pay practices of larger employers. Many will, therefore, want to provide additional information, including a contextual explanation, to
give a more nuanced and accurate picture, even if this is not strictly required by the legislation.
A failure to comply with the rules is likely to be treated as a criminal offence, attracting a fine for the defaulter. Prosecutions are likely to be rare, however, and fines are unlikely to exceed £5000.
The real incentive to comply with the new rules will come from the risk of adverse publicity and reputational damage. Defaulters are likely to be easy to identify, while unions, campaigners and the media could well be keen to name and shame those who try to keep their gender pay record under wraps, particularly in the case of well-known brands and those competing for public sector work. Defaulters may also attract attention from no-win no-fee lawyers seeking to generate equal pay claims.
What to do now
Employers wishing to prepare for the new regime might consider taking the following practical steps.
- Be proactive – doing nothing is not an option. Understanding your pay arrangements will help you manage and present information meaningfully and in context.
- Review all current pay practices across your organisation in order to understand the differentials that may exist.
- Consider any gender pay gaps present at a departmental, geographical or functional level and compare these with the composition of your workforce.
- Analyse the rationale behind your current arrangements to identify potential risk areas.
The impending UK duty for organisations to report on their gender pay gaps is not a novel idea: similar measures already exist in some other EU states, including Austria, Denmark, Sweden and Finland. However, questions are being raised about its effectiveness in practice when balanced against the additional costs incurred by companies. The gender pay gap has complex reasons and there is no “magic bullet” solution – be it more pay transparency or other measure. There is also concern that focusing on gender pay disclosure, particularly if this is accompanied by unbalanced media reporting, may divert attention away from the continuing need for a multi-pronged approach to gender equality involving the state, employers, schools, families and other key players.