A powerful drive for change or just an administrative headache?
Gender pay gap (GPG) reporting has been heralded by many (particularly the outgoing Coalition Government) as a win for women and a tool to drive forward equal pay.
As Nick Clegg announced in March 2015: “These measures will shine a light on a company’s policy so that women can rightly challenge their employer where they are not being properly valued and rewarded.” 1
The draft regulations were published in February 2016, and will come into force in October 2016. It is anticipated that other than minor changes to clarify the existing draft, the regulations will be implemented in their current form.
So what effect will these regulations have? Will they be the powerful driver of change some believe they will be, or will they simply be more red tape without the teeth to counter the burden they will create for employers?
In 2003, equal pay questionnaires were introduced. These provided a statutory procedure whereby an employee, who was concerned they were not being paid on a par with a colleague of the opposite sex, could submit a prescribed questionnaire to their employer to complete. The employer had a specified period of time to provide the information requested and an employment tribunal, in any related tribunal proceedings, could make an adverse inference from any failure by the employer to provide the requested information.
Many saw equal pay questionnaires as an essential tool for employees to test whether they had been suffering inequality of pay. Despite there being no evidence to support the Government’s view that they were being abused by employees and that businesses were inundated with them, and against overwhelming opposition, the Coalition Government took the decision in 2014 to abolish them on the basis that they constituted unnecessary red-tape and placed a disproportionate burden on businesses.
In its place, Acas provides a non-statutory questionnaire process, but without the statutory element it lacks teeth as there is no direct penalty for any failure to comply. While the employee could seek specific disclosure of pay data from the tribunal this would need to be in the context of existing tribunal proceedings.
Despite scraping the (allegedly red-taped) equal pay questionnaire in 2014, the Government will now require businesses to comply with the administratively heavy GPG reporting. The GPG regulations require employers with 250+ employees to publish the following information.
- The difference between male and female employees’ mean gross hourly pay.
- The difference between male and female employees’ median gross hourly pay.
- The difference between male and female employees’ mean bonus pay (which is very broad and includes commission, profit share, share awards and long term incentive plans).
- The proportion of male and female employees who received bonus pay.
- The numbers of male and female employees employed in each salary quartile.
This information will need to be published on or before 29 April 2018 (and each year thereafter) and will relate to employees employed on 30 April 2017 and each year thereafter (the ‘relevant date’). Employers will need to publish this information on a website that is accessible to the public for at least three years.
The resulting report should highlight an employer’s GPG and act as a benchmark as to how it compares with similar organisations and for future progress in reducing the GPG. However, there will be plenty of holes in the reporting requirements that can be exploited by employers to explain the gap. For example, maternity pay is included within the calculations of mean and median gross hourly pay, and will cause a big gap where an employer has a large number of employees in receipt of statutory maternity pay. A bonus payment which happens to be paid in the weekly/monthly pay period within which the relevant date falls (30 April) will be included within the calculations of mean and median gross hourly pay. Therefore, an employer’s overall mean or median GPG figure may be skewed if bonus payments are paid within this period or if it only pays bonuses in this period for certain types of employees but not for others.
An administrative headache?
Gathering and publishing the GPG information listed above is likely to take a significant amount of time and expense for employers. The Government has estimated that in terms of staff time and expense, the total annual cost per employer of collating and publishing its report will be £468.2 This appears to be a very optimistic estimate by the Government. The administrative burden of collating the information and publishing a report which complies with the regulations will be a substantial one for employers.
A toothless bite?
Whilst the administrative burden of producing a GPG report will be a headache for employers, the consequences of non-compliance are unlikely to keep an employer awake at night. Under the regulations there will be no requirement for employers to have their GPG reports independently verified or audited. An employer will not be subject to any civil penalty if it publishes an inaccurate or misleading report, or even it fails to publish a report altogether. Moreover, although employers can provide this information voluntarily, the regulations do not require them to explain any GPG or outline how they plan to address a GPG. Even if an employer has a GPG which is extremely high, and in excess of its sector average or is widening each year, it will not be subject to a fine or civil penalty under the regulations.
Instead, the Government will rely on a policy of naming and shaming. It proposes to produce league tables of employers’ reported GPGs by sector and publicise the identity of employers known not to have complied with the regulations. The threat of negative publicity is likely to only be a significant incentive for employers who are in the public spotlight or who have a record on gender equality which they wish to maintain, promote or improve. Whereas for businesses that do not have external or internal pressure to act transparently or to improve a GPG, the requirement for a published report appears to offer little incentive for compliance.
An area where the publication of a GPG report may have more wide-ranging impact for employers is on its ability to recruit female candidates. According to figures cited by the Government, 84% of women aged 16 to 30 said they would consider an employer’s gender pay gap when applying for a job and 80% would compare prospective employers’ gender pay data when looking for work.
Employers keen to identify the cause of any GPG so they can target how to reduce it, and employees using GPG to choose a potential employer, need to be aware that the information required under the GPG regulations will not provide them with the whole picture. Key reasons for a GPG may remain hidden. The regulations do not require any comparison of the pay of part-time and full-time staff, the number of men and women working part-time, or any breakdown of pay gaps by age, grade or seniority. Whilst there is nothing preventing an employer publishing or analysing more detailed GPG statistics, providing such information will of course create further administration for employers.
One step at a time
Overall the regulations are a small step in the right direction along the road to eliminating the disparity between male and female pay but they will fall far from bridging the expansive gap. The regulations should help highlight any GPG that an employer has and will encourage publicity minded employers to take positive steps to eliminate their GPG. However, for many employers the regulations will simply be an administrative burden which lacks the necessary bite to encourage effective improvement and may ultimately be all too easy to ignore.
Come back equal pay questionnaires, all is forgiven!
Source: 1. http://www.theguardian.com/money/2015/mar/06/lib-dems-push-mandatory-reporting-of-gender-pay-gaps
2. Government Equalities Office, Mandatory Gender Pay Gap Reporting Consultation: Impact Assessment
The content of this article is for general information only. For further information regarding gender pay gap reporting, please contact Abigail Trencher. Law covered as at May 2016.
This article is taken from our HR Matters Summer 2016 publication. Similar articles can be found in the latest edition.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at May 2016.