The Government has announced that it will bring into force section 78 of the Equality Act 2010 which requires employers to publish gender pay gap data. This regime creates an obligation for employers to disclose information regarding their employees’ pay.
The aim of the new regime is to provide greater transparency around gender pay differences.
Who will be affected?
The new regime applies to all employers who employ 250 or more employees. Specifically, the new regime applies to the legal entity which employs the employees, rather than across groups of companies.
For the purposes of the new regime, an “employee” is defined as anyone who ordinarily works in Great Britain and whose employment contract is governed by UK legislation. It will include workers and LLP members.
What information is required?
Employers caught by the new regime must provide information on its employees’ pay as follows:
- The percentage difference in mean gross hourly pay every April, starting with 30 April 2017 and using the employer’s usual pay period (most likely monthly). Mean pay is the average, so you add up all the salaries and divide by the number of employees to set the ‘mean’.
- The percentage difference in median gross hourly pay. The median is the salary rate that is exactly in the middle if the employees were ranked according to salary. So for three employees where the salary range is A = £10 per hour, B = £13 per hour and C = £42 per hour, the median is £13 per hour.
- The percentage difference in mean bonus during the 12 months preceding 30 April.
- The proportion of male and female employees who received bonus pay during the 12 months preceding 30 April.
- The number of male and female employees in each of the four salary quartiles. The Government has ‘clarified’ that the quartiles mean that an employer should look at the overall range of hourly rates paid to employees and then create four equal pay bands, with each band consisting of one quarter of the difference between the lowest and highest hourly rates. So if the pay differential is £7 per hour to £87 per hour, the difference is £80 and one quarter is £20. This means that the quartiles would be (i) £7-£27, (ii) £27-£47, (iii) £47-67 and (iv) £67-£87.
For the purposes of the new regime, “pay” includes basic pay, paid leave, maternity pay, sick pay, shift premium pay, bonus payments, car and standby allowance, and clothing, first aider and fire warden allowances. “Pay” does not include overtime, expenses, value of salary sacrifice, benefits in kind, redundancy pay, arrears of pay or tax credits.
“Bonus” will include profit share, share awards and long term incentive schemes.
Employers may provide further context to the pay information provided, including explanations for any discrepancies and details of any remedial action being taken, although this information is not mandatory.
What is the timetable for the new regime?
Gender pay gap information must be published within 12 months of 30 April 2017.
Bonuses should be calculated over a 12 month “look-back” period.
Pay is calculated every April, beginning with 30 April 2017, using the employer’s usual pay period (e.g. monthly).
Employers must publish the information in English on their searchable UK website, where it will be accessible by their employees and the public. Pay information must remain on the employer’s website for three years to illustrate progress and employers must submit and publish pay gap information annually.
Pay information must also be uploaded to the Government website. The Government will collate the data and publish sector tables.
Preparing for the new regime
In order to provide the mandatory pay information, employers may need to introduce new systems or processes to analyse their gender pay gaps. Specifically, employers will be required to report on the number of men and women in each quartile of their pay distribution. Employers must therefore calculate their own salary quartiles based on their overall pay range.
Whilst it is not anticipated that the pay gap data itself would illuminate any equal pay issues, the collation and analysis of the data to produce the required reporting data, may do so. Some thought therefore should be given to legal teams to assimilate this information for the purpose of providing advice on the required statutory reporting regime to give some legal advice privilege to that underlying data collection.
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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