The long-awaited draft rules on gender pay reporting have now been published. You should not, however, believe the headlines in the press saying that you do not need to focus on this until 2018: you should start planning now. In this article, we look at what the rules say and why this should stay on the top of your agenda for 2016.
The risk of reputational damage arising from negative publicity over gender pay gap issues and employment relations risks will be more significant for businesses than this fine. Which employers have to provide gender pay gap information? The reporting obligation will apply to private, voluntary and public sector employers in the UK with at least 250 employees.
What pay information must be provided?
Employers are required to publish both mean and median overall pay for each gender – but are not obliged to break these figures down by variables such as job type or grade, employees' location, or by full-time and part-time employees. Employers can provide additional context to the pay figures in supporting commentary but they are not required to do this. Our view is that most employers will want to explain the figures in the event they have an overall gap.
Some variable elements, such as overtime pay, do not need to be included, but others, such as bonus pay, shift premium pay and area allowances are included. Bonus payment figures must be included twice: firstly with the bonus element rolled up with other earnings to calculate the mean and median pay; and secondly bonus payments must be shown as separate statistics, showing the differences between the mean bonus payments made to men and women. This specific bonus reporting requirement will be particularly significant for insurance and financial services businesses which tend to have larger discretionary bonuses. Employers will also need to report on the numbers of men and women in each salary quartile. This will reveal pay gaps linked to seniority.
When and where will gender pay gap information be reported?
The press headlines last week focused on the delay in reporting until 2018. However, this is misleading. All applicable employers will need to take a snapshot of their gender pay data in April 2017 and annually thereafter in April. Employers then have 12 months to report the data and can choose the best time to do that. Employers will not want to risk taking that official snapshot without carrying out an audit now. Employers, therefore, have just over one year to audit data and rectify any issues identified before the snapshot is taken.
All reports must contain a statement confirming that the information is accurate and should also be signed by a Director (or the equivalent) before being published on the organisation's UK website in a manner that is accessible to all employees and the public. Employers will also have to upload the information onto a government sponsored website which will act like a gender pay league table.
How will the rules be enforced?
The Government has decided there will be no penalty for breach of the new rules. Whilst critics will argue this renders the rules ineffective, the Government hopes the “naming and shaming” approach will drive change through public pressure. The risk of reputational damage from negative publicity and the risk of losing valuable female talent to competitors is likely to be more effective than any nominal financial penalty.
What do you need to do now?
Establish whether your organisation will be caught by the new rules.
If it is, plan your audit process now. To ensure you retain legal privilege (and therefore confidentiality) over the audit data, take legal advice about this process and the risks identified in the findings at the very outset of the process. If you choose to collate the data without taking legal advice first, you risk creating evidence that could be used against you in an equal pay or discrimination claim, as well as creating data protection and confidentiality issues.
Once you have your data, take steps to “get your house in order” now to address any legal risks identified and start to resolve your gap in advance of the snapshot date next year.
In April 2017, take your gender pay snapshot. Thereafter work with your communications team on the best way to publish the data. Consider providing more information than required to show where gaps are caused by part-time working or variations in pay by location. Explain your gaps and demonstrate what you are doing to close them. This is your opportunity to shout about the diversity programmes you have in place to drive change. If you don’t have any, get some started now.
Between April 2017 and April 2018, consider when the best moment to publish the data is. This could link to your financial year or to a particular diversity programme you are publicising. Consider which director will take responsibility for signing off on the accuracy of the gender pay information and how they will satisfy themselves as to the accuracy of the information. Consider to what extent you will notify your employees of the data and ensure your HR teams and managers are ready to answer any questions raised by employees about the gap. They may ask for more facts and figures, they may assume discrimination is at play and want re-assurance that it is not. You will need to be ready to explain and respond accordingly. Firstly, beware breaching data protection rules or creating evidence for claims when providing information to employees.