Is there a gender pay
gap anywhere in your
organisation?
Not sure? Then you are not
alone but if you employ 250
employees or more you will be
expected to know the answer
to this and publish it.
What is a gender pay gap?
This is a term used to describe any difference in
the average pay of all women and men. Since
1997, the gap between men and women’s
average pay has been monitored by the Office
for National Statistics. In 2015, the gap was
9.4% for full time employees and 19.2% for all
employees (owing to the fact that more women
work part time than men and part time workers
of both sexes earn less per hour, on average,
then their full time counterparts).
Which employers are affected?
Both private and voluntary sector employers
with a workforce of 250 or more are required to
comply with the duty. Public sector employers
are excluded, but the Government announced
last year that it will introduce separate
legislation to ensure that these are subject to
the same obligations.
The requirement to have at least 250
employees is judged on 30 April each year
so a company that in April 2017 only has
245 employees will not have to comply with
the duty even if on 1 May 2017 it employs
further 5 individuals, but would have to do so
the following year (assuming its employment
figures remained static or increased). One issue
of concern to many of our clients was whether
group companies have to aggregate employees
across different subsidiaries. The Regulations, as
currently drafted, do not require this.
Are all employees counted?
Only “relevant employees” are counted. These
are defined as someone who normally works
in the UK and whose contract of employment
is governed by UK legislation. This is likely
to exclude employees of contractors and
temporary agency workers regularly used by
the employer. This is a narrower definition than
the one included in the Equality Act, and may,
therefore be subject to change when the final
Regulations are published.
What information has to be provided?
The government has published draft
Regulations. At present, employers must publish:
- Overall gender pay gap figures calculated
using both the mean and median average
hourly pay. (The median is thought to be
the best indicator as it is not distorted by the
small number of very high earners).
- The numbers of men and women working
across each of four pay bands.
- The ‘gender bonus gap’ for their
organisation and details of the proportion
of men and women who received a bonus in
the same 12 month period.
What counts as pay?
Pay includes basic pay, paid leave, maternity
pay, sick pay, area allowances, shift premium
pay, bonus pay and other pay (including care
allowances paid through the payroll, on-call and
standby allowances, clothing, first-aider or fire
warden allowances).
The issue of including bonus information throws
up some interesting issues. Bonuses that are
paid in the pay period ending 30 April will
be reported twice; in the employers headline
gender pay gap figures and in their gender
bonus gap figures. This may skew the headline
figure and, to avoid confusion, may result in
businesses paying bonuses at a different time
in the year.
Pay does not include overtime pay, expenses,
the value of salary sacrifice schemes, benefits
in kind, redundancy pay, arrears of pay and tax
credits.
Pay period
Pay is to be calculated over a specific reference
period according to how often the employee is
usually paid, but ending on 30 April each year.
How is the pay gap calculated?
To generate average earnings figures
unaffected by the number of hours worked,
employers will need to calculate an hourly rate
of pay for each relevant employee. The gross
weekly pay is determined using weekly pay
divided by weekly basic paid hours for each
relevant employee. However, it is not yet clear
whether the reference to basic paid hours
refers to contractual hours or the actual hours
worked (the later would give a much clearer
representation).
Employers must identify quartiles for the overall
pay range. This is likely to require:
-
Listing all relevant employees in order of
increasing pay rates.
- Dividing that list from top to bottom into
four groups containing equal numbers of
employees (made up of men and women).
- Determining the parameters of each pay
band by reference to the lowest earning
employee and the highest earning employee
in the pay band.
Where do we have to publish this
information?
On a searchable UK website that is accessible
to the public as well as your employees. The
information must be retained for three years.
In addition, employers will also have to
upload the information to a government
sponsored website (which is likely to display the
information in some sort of league table).
Can we opt out?
The current proposals will require all businesses
with employees over the 250 threshold to
comply. There are no opt-outs. However, the
government has decided against imposing
penalties for non compliance. Instead it will run
“periodic checks”, produce sector based tables
and it is also considering “naming and shaming”
those organisations that do not comply.
It is possible that businesses may also face
reputational damage if they do not provide the
information.
What are the risks to our business if our
report shows disparity between the pay of
men and women?
There might be perfectly good reasons for this
including the fact that more men hold the most
senior roles or more women work part time in
your organisation. This is not unlawful.
However, if you discover that there is a
difference between pay within specific roles
and grades, you will need to undertake further
work to ascertain the reasons for it. If these
relate to gender, then your organisation will
be vulnerable to a claim. Claims for Equal Pay
can be brought in the Employment Tribunal
(generally within six months from the end of
the employment contract) or in the County
Court (within six years). Trade unions are likely
to scrutinise the information provided to try and
find out if any claims can be brought. Claims
can be brought for six years’ back pay (five
years in Scotland).
When will the final Regulations be
published?
The government has indicated that it will
publish final Regulations in the summer.
When will this duty take effect?
The government has said that the Regulations
will come into force on 1 October 2016, but
employers will have until April 2018 to publish
the required information for the first time and
will then be required to publish each year.
However, the first data snapshot will be 30 April
2017. This is the date on which employers will
be required to calculate their gender pay gap
even though they have until 29 April 2018 to
publish the actual report. The requirement to
publish information on bonuses asks businesses
to revaluate the preceding 12 months, which
means that decisions that you make now will be
subject to scrutiny.
Spring 2016
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