The long awaited gender pay regulations have now been published, while the aim of these regulations is ultimately to encourage greater pay equality, they are also likely to fuel the trend for increasing numbers of equal pay claims against private sector employers; this risk is likely to rise in significance for companies due to the very considerable financial sanctions which can result.
The regulations will require private sector employers with 250 or more employees to report gender pay gap information. The obligation to report this information will encourage greater transparency, which the government hopes will act as a catalyst for introducing changes to tackle any inherent pay disparity within organisations. By October 2016, regulations will have been introduced to require larger employers (with 250 or more employees in the UK) to publish annual reports on their gender pay gap. The likely timeline is that for the first data snapshot to be collected on 30 April 2017 and published by April 2018.
Key points highlighted in the regulations include: The difference in mean and median pay between genders must be published (but not broken down by grade or job type). Disclosure of number of men and women in each salary quartile. The difference in mean bonus pay between genders must also be reported as a distinct line item, along with the proportion of each gender receiving bonus pay. Annual capture of data every April, to be reported within the following 12 months; data to be published on company website and confirmation of compliance to a government-sponsored website (which may publish comparative data). No civil penalties for non-compliance, although names of culprits may be published. Employers encouraged to provide narrative to put data in context.
Andrew Taggart, partner and head of the UK employment practice at global law firm Herbert Smith Freehills, commented: “Employers should take action now to prepare for the changes required by the regulations and be aware that pay information may be used as ammunition for equal pay claims. Until now, these claims have been restricted largely to the public sector where pay information is often more readily available. This may have led private sector employers to believe they have no real exposure. However, everything could be about to change and private sector employers may find they have very significant liabilities for which they have not made adequate provision.”
Paul Epstein, a QC and specialist in equal pay at Cloisters, commented: “For the first time in the UK employers with 250 or more employees will be required to report on their gender pay gaps. The information those employers will be obliged to publish is likely to help their current and former employees understand whether they can bring successful equal pay claims. Between now and April 2018 – the latest date for publication of that information – there is an opportunity for employers to take steps in order to avoid or minimise such claims.”
Herbert Smith Freehills has experience advising employers on landmark equal pay claims in the private sector, including providing advice on legally privileged Equal Pay Reviews. Our equal pay team contributed to the Employment Lawyers’ Association sub-committee which responded to the Women and Equalities Select Committee Inquiry to Inform Government Strategy on Reducing the Gender Pay Gap.