Earlier this year the Government published draft Regulations regarding gender pay gap reporting. Following consultation, the Government has now published revised Regulations (the Equality Act 2010 (Gender Pay Gap Information) Regulations) which are expected to come into force on 6 April 2017.
Under the revised Regulations, all private employers with 250 or more employees must report:
- the mean and median hourly pay gap between men and women based on the pay period containing the snapshot date (5 April). Bonuses are included within this calculation of pay;
- the annual bonus gap between men and women, again using the snapshot date;
- the proportion of men and women who received a bonus that year; and
- the relative proportions of men and women in each quartile pay band.
A summary of key points to note in the revised Regulations are set out below:
The ‘snapshot date’ for determining whether employers meet the 250 employee threshold and by reference to which gender pay data must be gathered has been changed from 30 April to 5 April each year. This means that employers will be obliged to make their first report at the latest by 4 April 2018.
Definition of ‘employee’
Only employers with 250 or more ‘employees’ are caught by the Regulations. Although it was unclear in the previous draft, the revised Regulations state in the Explanatory Notes that the wide definition of ‘employee’ in the Equality Act 2010 applies for these purposes. This means that employees, workers and even self-employed consultants who personally perform work are counted towards the 250 employee threshold.
Under the previous draft only employees who ordinarily worked in Great Britain were counted towards the 250 employee threshold. This has been removed in the revised Regulations. Therefore, British employers who do not have 250 employees in the Great Britain but have 250 employees internationally will now be obliged to report.
It is likely that many more employers will be caught by the revised Regulations as a result of these changes. Also, it seems inevitable that employers will find it more difficult to gather the relevant data in relation to, in particular, self-employed consultants and international employees.
A new exception
One small crumb of comfort for employers comes in the shape of a new exemption from the reporting duty in relation to workers where the employer does not have, and it is not reasonably practicable for them to obtain, the relevant data.
Mean and median gender pay gaps
A useful amendment in the revised Regulations is that employers are now only required to base their calculations for the mean and median pay gap on ‘full-pay relevant employees’. This excludes employees who, during the snapshot period, are being paid nothing or at a reduced rate as a result of being on leave (holidays, maternity, other family leave and sick leave). This means that if there are a significant number of women on maternity leave being paid less than full pay during the snapshot period, these employees are excluded and so the resultant data will be more meaningful. However, the same exclusion does not apply to the calculations required for bonuses and quartiles, so these may still be skewed by those who are temporarily on low pay.
Quartile pay bands
It was unclear in the original draft Regulations how the quartile bands were to be set up for the purpose of reporting the numbers of men and woman who fall within each band. The revised Regulations clarify that the quartile bands will be based upon putting the employees in order of their pay and then dividing them into four equal groups. The proportion of male or female employees in each quartile will then need to be calculated in accordance with a formula in the revised Regulations.
Gross hourly pay
The revised Regulations have amended the method employers will be required to use to calculate an employee’s gross hourly pay. There is a detailed calculation method in the revised Regulations which uses an employee’s normal working hours, where applicable, and a 12-week reference period for employees whose working hours vary from week to week.
The revised Regulations now make it clear that, for the purposes of determining the employer’s mean and median gender pay gap, only the portion of any bonus payment that is proportionate to the relevant pay period should be included. Further, where a bonus is awarded as securities, securities options and interests in securities, it will be treated as paid at the point in time when it gives rise to taxable earnings or taxable specific income.
Failure to comply
One of the criticisms of the previous draft regulations was that there was no penalty for non-compliance. Whilst the Regulations do not provide a mechanism, the Explanatory Notes specify that the Human Rights Commission will be able to a take enforcement action against an employer for a failure to comply with the Regulations.
We understand that the Government is planning to publish guidance on the Regulations once Parliament has approved them.
If you are an employer in the private or voluntary sector with 250 or more employees, you should start thinking about the implications of the Regulations now. In particular, you should assess your pay data as soon as possible so that you can:
- establish the extent of any gender pay gaps within the business;
- identify the reasons for such pay gaps; and
- carry out an assessment of whether the business could be taking steps to reduce the gender pay gap before its collection of data on 5 April 2017 and beyond.
As this is a complex area, we would recommend that you seek legal advice.