In December 2016 the government published the final draft of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 which are due to come into force on 6 April 2017. This was followed, in January 2017, by draft ACAS guidelines on managing gender pay reporting in the private and voluntary sectors. The regulations now clearly set out the legal requirements of the new mandatory gender pay gap reporting regime, and the associated guidance provides a clear step-by-step process for calculating the necessary data. Employers should therefore be making a start on their final preparations for the new gender pay reporting regime, in good time for the upcoming reporting deadline.
To Whom do the Regulations Apply?
All private and voluntary sector employers with a headcount of 250 or more employees will need to comply with the new reporting requirements. This headcount applies to each legal entity within a group of companies.
The question of who counts as an “employee” will be determined by reference to the extended definition of employment contained in the Equality Act 2010. This will therefore include employees, workers, agency workers and some self-employed people. Staff who work abroad may also have to be included in the reporting requirements.
What Data Needs to be Reported?
Employers will have to publish the following data, calculated as at the relevant “snapshot date” (i.e. 5 April each year):
- Mean and median gender pay gap (based on hourly pay).
- Mean and median bonus gender pay gap.
- The proportions of male and female employees receiving a bonus payment.
- The proportions of male and female employees in each quartile pay band.
- A written statement of accuracy.
Hourly pay will be calculated using gross hourly rates for normal working hours, including allowances and bonuses but excluding overtime and benefits in kind. Employees who are not on full pay, because they are on leave for any reason, will be excluded from these figures. Employees who are working part time, however, need to be included with their actual salary, not their full time equivalent.
Bonus pay will be calculated on the basis of a cumulative annual figure, paid in the year prior to the snapshot date. This figure will include cash bonuses and also any taxable income attributable to bonus schemes.
The written statement must, as a minimum, confirm that the data published is accurate and must be signed by an appropriately senior person. In addition, though there is no legal requirement to do so, employers are encouraged to include a supporting narrative with their statement of accuracy, to explain the reasons behind any gender pay gap and/or what steps are being taken to eliminate it.
Where Should this Data be Reported?
Gender pay gap data will have to be published on both the employer’s website, and a government website (yet to be confirmed), and remain accessible for three years.
When is the Reporting Deadline?
The requisite data must be published within one year of the snapshot date – that means, by no later than 4 April the following year. So, the first set of reporting figures must be published by 4 April 2018 at the very latest. Reporting will then have to be completed annually, by 4 April in each subsequent year.
The ACAS guidance recommends that employers aim to publish their data as soon practicable after the snapshot date in each year. This is to ensure that the data is “fresh” and easily recalled, to avoid any last-minute unanticipated issues or complications, and to set an example and gain from brand and reputation enhancement.
What Happens if We Fail to Publish Gender Pay Data?
It is a legal requirement that all relevant employers publish their gender pay data from April 2017, and failure to do this by the relevant deadline will constitute “an unlawful act”. Though the regulations themselves do not impose any financial penalties or sanctions for non-compliance, ACAS has clarified that the Equality and Human Rights Commission will have the “power to enforce any failure to comply with the regulations”.
In addition, employers who do not comply will run the risk of significant reputational damage, which could impact not only on brand image but also on staff retention and recruitment. It could even encourage existing employees to bring equal pay claims in the Employment Tribunal.
Practical Considerations for Employers
If your organisation hasn’t yet made a start on putting the relevant procedures in place and collating the necessary information for gender pay reporting, now is the time to do so. The snapshot date, on which pay data will crystallise, is 5 April 2017.
As a starting point, employers will need to ensure that they have up-to-date information about all relevant employees’ pay, benefits and gender (including any self-defined gender identity).
Next, consider who within your organisation will be tasked with calculating the relevant figures and how. The ACAS guidance provides a handy template “employee communication” letter to assist with the process of collating information, as well as a step-by-step guide to calculating each figure.
Finally, make sure that the data is published in the correct forum, and in good time before the deadline. Don’t underestimate the impact that gender pay gap reporting figures (or lack thereof) may have on your reputation, recruitment and retention of staff, and workplace relations. Careful consideration should therefore be given to providing a detailed supporting narrative as part of your statement of accuracy, to explain the non-discriminatory reasons behind any gender pay gap and/or the steps that will be taken to eradicate it. In particular, the fact that part time employees feature within the data with their actual salaries is something that many employers will wish to emphasise in their narratives. An employer who has a lot of part time employees (who may well be predominantly female, given national demographic trends) is likely to have a significant gender pay gap given that full time equivalent salary is not taken into account in the figures that have to be reported. Having an alternative set of figures within the narrative that reflect what the position would be if full time equivalent salary had been taken into account may well be a very helpful step in demonstrating a more realistic picture, as well as reminding staff that the organisation takes a positive approach to part time working.
Posted on 06/02/2017 in Legal UpdatesBack to Knowledge