Trust & Transparency agenda moves forward with the introduction of mandatory gender pay gap reporting.

09 November 2016

By Susan Fadil, Director, Entity Governance and Compliance team and Anna Sanford, Solicitor, Employent.

Continuing our focus on the trust and transparency agenda and the introduction of additional corporate reporting requirements we now turn our attention to mandatory gender pay gap reporting.

Mandatory Gender Pay Gap Reporting

The Equal Pay Act 1970 was enacted at a time when it was not uncommon for employers to openly award different rates of pay to men and women performing the same job, or to reserve certain jobs for men and other (usually low-paid) jobs for women. Although such overt discrimination is less common today, a significant difference in average hourly rates for men and women nevertheless persists in the UK. In July 2015, the Prime Minister announced that the government would "end the gender pay gap in a generation". The government initially published a consultation paper on proposals to introduce a mandatory gender pay gap reporting requirement for non-public sector employers with at least 250 employees, then followed up on 12 February 2016 with its response to the consultation, draft regulations (the Draft Equality Act (Gender Pay Gap Information) Regulations 2016), and also a second consultation on the proposal and the draft regulations. It is anticipated that the final version of the regulations (the “Regulations”) will commence in April 2017.

Who does this apply to?

The Regulations will apply to organisations with more than 250 employees in the UK. These will require employers to take a pay data ‘snapshot’ as at April 2017 and publish certain gender pay gap figures within 12 months. Thereafter, they must calculate and publish such figures annually.  

What are the main changes?

This reporting will cover a number of disclosures, including:

  • Mean and median gender pay gaps;
  • Mean and median gender bonus pay gap;
  • Proportion of men and women receiving a bonus; and
  • The number of men and women in salary quartiles.

Companies will have the option to publish a narrative explaining any pay gaps and setting out what action they plan to take to close them. The provision of a narrative will likely be strongly encouraged, but it will not be mandatory.

How will companies comply with this?

The mandatory figures will need to be published on the company’s website and must remain available for three years. The figures must also be uploaded to a government website.  A written and signed statement confirming that the gender pay gap information is accurate must accompany the required information. 

There is no requirement to publish gender pay gap information in a company’s annual report. However, listed companies are required to include gender information about directors and senior managers in their strategic report.

Actions

Although the final deadline to publish the mandatory gender pay gap figures is not until April 2018, employers should start to take steps to prepare for the new regime, including identifying employees who are in scope of the Regulations, analysing which elements of the remuneration package would be reportable under the Regulations, calculating the gender pay gap information and considering with their legal advisors and reward consultants their gender pay gap position as a matter of priority. By calculating gender pay gaps now, and obtaining legal advice on the options, employers will be in the best position to take action in advance of mandatory reporting.

If you would like to discuss this further, please get in touch with Susan Fadil or Anna Sanford.

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