Reporting on the gender pay gap

New regulations require employers in Great Britain in the private and voluntary sectors with at least 250 employees to publish data on their gender pay gap. The first date at which the difference in pay between male and female employees must be calculated is 5 April 2017. The figures must then be made publicly available no later than 4 April 2018.

With 5 April 2017 now behind us, affected employers who have not already done so should focus on compiling the necessary information in order to meet the deadline for publication. They should also consider what action may be needed if a gender pay gap is identified.

Gender pay gap

It has been unlawful since the Equal Pay Act of 1970 to pay men and women differently for the same or broadly similar jobs. However, the average earnings of men still exceeds that of women by 18.1% (according to recent figures from the Office of National Statistics). While this difference may partly be explained by women's choices in the workplace, there may be other factors at play and the Government has taken the view that action is needed to reduce the gender pay gap.

Government action

The Government has therefore introduced mandatory gender pay reporting for large employers in Great Britain i.e. those in the private and voluntary sectors with 250 employees or more. Similar rules have also been introduced for large public sector employers.

Key dates

Final regulations setting out the detail of the new reporting rules came into force on 6 April 2017.

5 April 2017 is the first "snapshot" date as at which the gender pay gap must be calculated with the information published online within a year after that date i.e. by 4 April 2018.

Reporting must then take place on an annual basis where the employer continues to meet the 250 employee threshold.

Guidance

ACAS and the Government Equalities Office have together published non-statutory guidance (the Guidance) to assist employers in complying with their obligations under the regulations.

Q&As

Below is a series of Q&As explaining how the regulations operate as well as looking at a number of issues which employers will need to address when complying with the new regime. 

If you have any questions about compliance, please contact Crowley Woodford or Ruth Buchanan or your usual Ashurst contact.

Gender pay reporting regulations Q&As

Which employers must publish gender pay data?

The regulations apply to employers in Great Britain in the private and voluntary sectors with at least 250 employees on 5 April each year. An employer is widely defined and includes, for example, both companies and partnerships.

The Guidance encourages employers with fewer than 250 employees to give serious consideration to the business benefits of complying with the regulations voluntarily. Employers close to the threshold may find that the number of employees is sometimes above and sometimes below 250 in any given year. In that case, having reported at least once on the gender pay gap, employers may wish to continue to do so on a voluntary basis, even when below the threshold, in order to provide continuity of reporting.

The rules apply to individual employers so groups where each member company has fewer than 250 employees will not be required to report at all. Conversely, groups where more than one member has at least 250 employees will need to produce multiple individual reports. The Government rejected reporting at group level on the grounds that subsidiaries may operate in a wide range of sectors or have job types or remuneration levels that are not comparable. However, the Guidance encourages corporate groups to disclose gender pay gaps across the wider group on a voluntary basis if that would be informative and appropriate.

The definition of an employee for the purposes of the 250 employee threshold is the extended definition used in the Equality Act 2010 and may include, for example, partners and  LLP members as well as some types of self-employed contractors. 

Which employees must be included in the data?

Data has to be produced in relation to "relevant employees" i.e. any person who is employed (within the wider Equalities Act definition) by the relevant employer on the snapshot date of 5 April, other than partners or LLP members (although they may still count towards the 250 employee threshold). 

There is a distinction between "relevant employees" and "full-pay relevant employees". The latter term excludes relevant employees who are on leave and being paid at a reduced rate or nil. Employees on leave at less than full pay may be excluded from some data (see more below under "What information must be published?").

A relevant employee includes individuals with a contract of employment or contract of apprenticeship. It also includes those employed under a contract personally to do work such as some self-employed contractors, although employers may omit them if they do not have their pay data or it would not be reasonably practicable to obtain it. The Guidance recommends, however, that new contracts should oblige contractors to provide the necessary information.

In terms of territorial scope, the Guidance confirms that employees not based in Great Britain could still be covered where they have a strong connection with Great Britain. The Guidance gives some indication of how that might be assessed.

Although the Guidance is intended to provide help, employers face some difficult issues with regard to determining which employees are within the scope of the regulations, both in terms of their status and their geographical location, and the impact this would have on the data to be published. We would be happy to help steer you through this process.

What information must be published?

There are six pieces of information which must be published:

 In relation to items 1, 2 and 6, employees on leave who are being paid at a reduced rate or nil may be excluded. Leave includes:

• annual leave;
• maternity, paternity, adoption, parental or shared parental leave;
• sick leave; and 
• special leave.

Allowing such employees to be excluded avoids skewing the data given that, for example, a significant number of women might be on maternity leave at the snapshot date. However, such employees must still be included in the bonus data.

The Guidance also provides that employees who receive no pay at all during the pay period in which the snapshot date falls (such as zero hours workers) should be excluded from the data on hourly pay, even though they are not on leave.

Looking at items 1 to 4, both a mean figure and a median figure must be published. The reason given by the Government for using a "mean" figure is because women are often over-represented at the low earning extreme and men over-represented at the high earning extreme. The "median" figure is also required because it shows a more typical difference in pay as it is unaffected by a small number of very high earners. 

As regards bonus pay comparisons, employers only have to include employees who actually received a bonus. Additionally they must show the proportion of male and female employees who received bonus pay. Government figures indicate a 57 per cent "gender bonus gap" across the economy as a whole so the implications of having to disclose bonus comparisons, as well as the proportion of men and women receiving bonuses, is something that a number of employers may need to address.

The pay and bonus comparisons must be made between all male and all female relevant employees (apart from, in some cases, those on leave who are in receipt of reduced or nil pay). There is no requirement to break the figures down into, for example, part-time and full-time employees or by reference to job titles or grades, as had been consulted on originally. The Government rejected a more granular approach on the basis that separate figures for full-time and part-time workers may not be useful or appropriate for many employers and also comparisons by grade or job type would not be workable as many employers do not have standardised grading structures. The Guidance does, however, suggest that large employers may find it useful to provide additional breakdowns of the data, for example where they operate in a number of completely different employment sectors or where the jobs and levels of pay and bonuses are not obviously comparable.

The use of only overall pay figures will make it harder to compare pay for similar roles. However, partly to make up for the lack of granularity in the pay comparisons, employers are required to rank their employees by hourly rate of pay and split that list into four equal quartiles. The proportion of male and female employees in each quartile must be disclosed.  The intention behind this is to see where women are concentrated in the pay scale and whether there are any blockages to their progression.  

What counts as ordinary pay?

The regulations define what counts as "ordinary pay" for the purpose of comparing hourly rates of pay. The following table sets out what is and what is not "ordinary pay".

The Guidance gives more information about which elements of pay should and should not be captured.

Pay is calculated before deductions made at source, such as for income tax and pension contributions, and after salary sacrifice arrangements.

Allowances include, for example, relocation payments or car allowances but exclude the reimbursement of business expenses.

Pay includes paid leave such as maternity pay and sick pay but employees who are on leave at the snapshot date and are being paid at a reduced rate or nil do not have to be included in all of the pay data figures (see more above under "What information must be published?").

The Government decided to exclude overtime from the pay calculation for these purposes because men are often able to work more overtime than women (mainly due to childcare issues) and it wanted to avoid creating a perverse incentive for employers to force women to work more overtime. Shift premium pay is included in the definition of pay but employers can add some contextual explanation to the figures if they feel that female employees' earning potential is being depressed because they need to work family-friendly hours.

What counts as bonus pay?

Bonus pay is defined separately to mean remuneration that:

• is in the form of money, vouchers, securities, securities options or interests in securities; and
• relates to profit sharing, productivity, performance, incentive or commission.

Bonus pay does not include ordinary pay, overtime pay or remuneration referable to redundancy or termination of employment.

Share awards are treated as paid when they give rise to taxable earnings or income. Where no tax charge arises, for example under tax-advantaged share plans, the share award is excluded.

What is the pay period for which data must be collected?

Employers have to provide data on the hourly rate of pay, calculated by reference to the amount of ordinary pay and bonus pay received during the "relevant pay period" within which 5 April falls.

Bonuses have to be included in calculating the hourly rate of pay if they are paid in the relevant pay period in which 5 April falls but can be pro-rated so that only the amount of the bonus referable to that pay period is included.

The relevant pay period is the period for which the employer pays the employee basic pay, such as a week, a fortnight or a month. If the employee does not receive basic pay, the relevant pay period is the period for which the employer most frequently pays the employee one of the elements of ordinary pay (see the table above). 

Comparisons of bonus payments paid to male and female employees include bonuses paid over the 12 months preceding 5 April. Therefore, for the first year in which data has to be collected i.e. at 5 April 2017, bonuses going back to 6 April 2016 will have to be taken into account. 

In order to compare the pay of different employees, employers must calculate an hourly rate of pay for each one.

A detailed step-by-step procedure for calculating the hourly rate of pay is set out in the regulations. In essence, it involves calculating a weekly amount of pay and dividing it by the number of working hours in a week for that employee. Detailed provisions explaining how to calculate the number of working hours per week, particularly where the employee does not have regular working hours, are set out in the regulations.

Where must the information be published?

The data must be published on the employer’s website in a manner accessible to all employees and the public for at least 3 years. A senior person (for example, a director in the case of a corporate employer) must sign a statement confirming the accuracy of the information.

Employers may want to explain the reasons for any gender pay gap and what action is being taken to close it. A voluntary narrative explaining the figures is permitted and the Guidance strongly encourages this.  

The data must also be uploaded on to a Government website. The Government intends to publish the figures on a sector by sector basis to allow comparisons to be made. Examples of compliance and non-compliance will be identified so there may be an element of naming and shaming.

The Government does not intend to create any additional civil penalties for non-compliance at the moment. However, failure to comply with any obligation imposed under the regulations constitutes an "unlawful act" under the Equality Act 2006 and the Equality and Human Rights Commission may take enforcement action.

When does the data have to be collected and published?

The first calculation of gender pay data must be for the pay period in which 5 April 2017 falls. Bonuses paid in the 12 months preceding 5 April 2017 must be included in the bonus data. That data must then be published within 12 months i.e. by 4 April 2018. Reporting must take place annually thereafter.

What issues should employers be thinking about in preparing their mandatory gender pay reports?

There are a number of issues which affected employers need to think about when preparing to publish their gender gap data.These are summarised below.