Earlier this month the government announced a consultation on its manifesto commitment to require larger employers to publish gender pay information. The proposed regulations will apply to employers with at least 250 employees, to include private and voluntary sector employers in England, Scotland and Wales. The regulations include the possibility of enforcement provisions in the event that an employer fails to comply with the reporting requirements. But what is the gender pay gap, why does it matter and what will the new reporting regulations require of employers?

The gender pay gap is the difference between men and women’s average salaries. A briefing published by the International Labour Organisation (“ILO”) in March 2015 highlighted that, globally, women earn approximately 77% of what men earn, and the gap widens in respect of higher-earning women. At the current rate of progress, the ILO predicts that pay equity between men and women won’t be achieved for 70 years.

Whilst these figures are stark, the picture in the UK is slightly more optimistic. The Office of National Statistics suggest that the gender pay gap in the UK was 9.4% in 2014 (compared with 10.0% in 2013). This figure was the lowest since records began in 1997, and is part of an overall downward trend from 17.4% in 1997. Of course, paying men and women differently in respect of the same job is unlawful, and has been since the introduction of the Equal Pay Act in 1970. So why does the gender pay gap persist?

In its foreword to the consultation, Nicky Morgan MP argues that the difference in pay cannot be explained only by instances of unlawful discrimination. She cites further underlying and varied issues, such as the concentration of women in less well paid jobs and the fact that women are less likely to occupy senior roles (apparently making up only 34% of managers, directors and senior officials).

The government is concerned that the above state of affairs is bad for the economy. But employers should also be concerned. Any indication of gender-biased pay inequality in a workforce gives rise to a potential litigation risk. Furthermore, if we believe the evidence suggesting that more diverse teams are more successful, the lack of senior women in any organisation potentially undermines its performance.

So what do the reporting requirements hope to achieve? The proposed regulations will require employers with more than 250 employees to publish the difference between the average pay of their male and female employees. The government may hope that requiring organisations to publish gender pay information will encourage employers to take action and put in place measures to reduce any pay gap.

However, we are unlikely to be able to quantify the results of any such regulations until the new regime has been in place for at least a few years. What will be particularly interesting is what further steps the government might take if the regulations do not result in a quantifiable closing of the gender pay gap – could the ever controversial idea of gender quotas for management boards become a reality?

In the meantime, employers may understandably be concerned that the mandatory publishing of the required gender pay information will be administratively and financially burdensome. If employers wish to get a head start on the new regime, a first step would be to identify any gender pay gaps in their organisation and draw up action plans to address them.

The consultation closes on 6 September 2015.

Posted on 24/07/2015 in Legal Updates

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