Pay has been at the forefront of our minds recently what with the National Living Wage in force from 1 April and the imminent requirement for some employers to publically report on gender pay gaps within their business.
In many occupations women still earn less than men for doing the same or similar roles. The World Economic Forum recently reported that women globally only now earn what men earned a decade ago. It is generally accepted that something needs to be done to speed up the pace of change in women’s pay. The Government is introducing gender pay reporting with the aim of encouraging (or shaming) employers into reducing the pay gap.
What is Gender Pay Gap Reporting?
Companies with 250 or more employees (who work in Great Britain and have contracts of employment governed by UK legislation) will be required to publish data on male and female earnings, to establish any pay difference.
Can small companies ignore this issue?
Whilst companies with less than 250 employees will not have to publish this data, look out for a ‘knock on’ effect as your female employees may seek clarification on gender pay differences, putting you at risk of claims of sex discrimination, equal pay and/or constructive dismissal which could be costly to defend. Therefore it is still important for you to establish if there is such a gap and take steps to fix it.
What is the current position on Gender Pay Gap Reporting?
After some delays, the Government intends to publish regulations in October 2016 and will also be issuing guidance for companies. You will be required to prepare a snap shot of gender pay data by 30 April 2017 and publish the first annual gender pay reports within 12 months of that date.
What data about employees’ pay must be published?
You will not be required to publish pay details of male and female employees by job grade or occupation. This level of detail was felt by the Government not to be workable. Neither will there be an obligation to show any differences between full and part time employees. The following data is required:
• difference in the ‘mean’ (i.e. average) pay and ‘median’ (i.e. the middle value in a list of values in numerical order) pay, between male and female employees;
• difference in ‘mean’ bonus pay between male and female employees and the proportion of male and female employees who received bonus pay;
• number of male and female employees according to ‘quartile pay bands.’
‘Pay’ must include basic salary, paid leave, maternity and sick pay, bonuses, shift premiums and allowances and will exclude (for example) overtime pay. Because men on average receive higher bonuses, bonus pay should be analysed separately.
In its response to the consultation the Government commented that many employers will also want to publish ‘contextual data’ justifying (if possible) any pay gaps and if appropriate explaining what actions will be taken about them. We understand this contextual data will not be a legal obligation, but ‘strongly encouraged’ in the Government guidance.
How must employers publish the data?
You will be required to publish the data on your company website signed off by a director, partner or equivalent, confirming it is accurate and to keep it there for 3 years. You will also have to upload the report to a government website.
How should employers prepare?
You should familiarise yourself with the new reporting requirements and decide how you will comply with them; many employers will already have HR data so as to be able to do so. More significantly, you will need to look at the impact on your business by carrying out an equal pay audit to identify any gaps and decide how you will deal with them, in good time. You may be able to justify any pay gap due for example to genuine pay progression or objectively measured performance related pay.
Because the data will be available to employees and third parties you should decide whether or not to notify employees (and others such as shareholders) in advance and what information to provide. You should seek legal advice before taking any action to ensure that it is fair and non discriminatory, so as to minimise the risk of costly and distracting employment claims.
This is also a good time to review and update your equal opportunities policy.
What if my company fails to comply?
There are no criminal or civil penalties for failing to comply with gender pay reporting or publishing inaccurate information. However, it is expected those companies that fail to comply will be “named and shamed”. This may adversely affect the reputation of a company’s brand, staff recruitment and retention and the success of any tendering application. It is also likely that unions will target companies in support of equal pay claims.
If you have any employment law queries in relation to the issues mentioned in this blog please contact Emma McLoughlin or your usual Morrisons’ adviser.