Written by
Ian Jones

Published
28 Jun 2017

How does compulsory gender pay reporting impact your business?

28 Jun 2017 • by Ian Jones

After a long lead-in, The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 ("the Regulations") were finally made and came into force in April. They require private and voluntary sector employers with 250+ employees (an extended definition) to publish specified information about gender pay differences. ACAS and the Government Equalities Office have published draft Guidance on the Regulations.

For the public sector in England (and certain cross-border authorities), new regulations with the 'specific equality duties' and new gender pay reporting came into force on 31 March 2017. Welsh and Scottish specific equality duties already require publication of gender pay data. Northern Ireland is likely to produce its own version of gender pay reporting regulations later this year. 

It's important to act now to ensure you understand how you are affected, the calculations you are required to make and publish, and where issues might arise. Although publication is not compulsory before 4 April 2018 (or 30 March 2018 for public sector), government guidance recommends publication "as soon after April [2017] as it is reasonable". 

Do I need to report on gender pay?

'Employees' for the reporting threshold is broadly defined as for the Equality Act 2010, so includes potentially 'workers', self-employed contractors and partners in LLPs if required to do work personally. It could also include staff overseas because the regulations do not limit the scope to those working in Great Britain. The test will be broadly based on whether such staff could claim protection under the Equality Act 2010. There is no requirement to count employees of other group companies; each company stands on its own. 

Only the pay data of 'relevant employees' is reported on. An employer could reach the reporting threshold (determined by those employed on the 'snapshot date' of 5 April or 31 March), but have less than 250 'relevant employees' to report on. LLP members are not 'relevant employees' for this purpose. Additionally, you will not have to report if it does not have, and it is not reasonable to obtain the data for those under a contract personally to do work (e.g. self-employed contractors).

What are the requirements?

The regulations set out a number of required calculations, which, apart from bonuses, are based on the pay period (e.g. weekly, monthly etc) in which 5 April (or 31 March) falls. For some calculations, only 'full pay' relevant employees are included (i.e. excluding those on nil/reduced pay due to sick leave or family leave, for example). But for other calculations – notably bonuses – all relevant employees are included. 

The regulations are very technical, perhaps overly so, considering there are no penalties as such for non-compliance or producing inaccurate figures. There is very little likelihood of the regulations ever being interpreted by courts or tribunals. There is also some lack of clarity around what counts as 'pay', and potential for skewed data when it comes to, for example, zero hours workers and those on variable hours. Significant pay gaps may also occur because of the under-representation of female employees in senior leadership roles and under-representation of men in more junior positions. This was the position that Virgin Money reported in its 2016 annual report and which led to a mean gender pay gap of 36% at April 2016.

Often the guidance goes significantly further than the regulations, and in some cases is inconsistent with them. Where questions remain unanswered, many employers are deciding to follow the spirit of the regulations to represent the situation accurately and fairly.

The information must be signed off by senior management, published on your website for three years and uploaded to a government website. Despite the apparent lack of sanctions, the implications for recruitment, retention, procurement and reputation should not be underestimated. If your figures are not impressive, an additional narrative will usually be advisable to explain the context and, in appropriate cases, set out an action plan.