Gender pay reporting: disclosing and closing the gap

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Gender pay reporting: disclosing and closing the gap

by Paul Harrison and Hilary Wilde, Baker & McKenzie LLP

Issues for employers

There will be a number of issues of concern for employers in these proposals, including whether existing systems are able to collect the necessary gender pay data, and, if not, the administrative burden of ensuring that they do so. Of course, much will depend on what information will need to be reported, and this is not yet clear.

There can be complex reasons for gender pay differences, particularly in large and multinational organisations. A generic measure of the gender pay gap may be felt by employers not to give a full and accurate representation of the position, but could lead to adverse publicity, employee relations issues and possibly fuel legal claims. There could also be implications for what multinational employers report in other countries.

Is there still a gender pay gap problem?

According to data from the Office for National Statistics (ONS), and as reported by the government in the consultation, the overall UK gender pay gap, measured as the differential in pay between men and women for both full and part-time employees, and based on median hourly earnings, stands at 19.1%. This is, in fact, the lowest since records began in 1997, when it was 27.5%. The same is true for the figure for full-time employees, which is at its lowest at 9.4%.

However, the ONS's figures for the private sector alone reveal a slightly worse picture than the average: a gender pay gap of 17.5% for full-time employees, with a differential of around 16% for full-time management and senior positions, and a differential of nearly 25% for employees in skilled trades.

In the consultation, the government states that, while much has been done to close the gender pay gap, it believes that greater transparency of gender pay gap information will encourage both employers and employees to consider what more can be done.

Consultation on key questions

The consultation raises a number of key issues on which the government is seeking views, including the following:

Whether disclosure of a gender pay gap would meet the government's objective of encouraging employers to take steps to close it.
Whether 250 employees is the appropriate threshold at which to require this disclosure.
Employees and other interested parties, such as shareholders, may want to compare the employer's gender pay gap with those of similar organisations, and whether the ability to make that comparison is important.
Where the gender pay gap information should be published, and whether that should be prescribed by legislation. The consultation gives the example of publishing the data in a prominent place on the employer's website. This has echoes of the obligation to publish equal pay audit details when ordered to do so by an employment tribunal (see feature article "Compulsory equal pay audits: bridging the gender pay gap").
The extent to which employers are able to obtain information on gender pay differences from their current data and systems. For example, can they obtain an overall gender pay gap figure, or could it be broken down by full-time and part-time employees, or by grade or job type? Related to this is the issue of the additional costs to employers of complying with the new obligation by way of additional infrastructure and new software and training.
Whether employers should be required to publish additional narrative information or context to explain a single gender pay gap figure, or whether this should be optional. An associated issue is whether the government should publish guidelines on what supplemental information ought to be included.
The frequency with which employers should be required to disclose gender pay gap information: annually; every two or three years; or some other period. It should be noted that section 78 of the Equality Act 2010 provides that disclosure of gender pay gap information may not be required of employers more frequently than once every 12 months (see box "Background to legislative change").
How to ensure compliance with the new requirement through the use of civil enforcement procedures, including enforcement notices that are enforceable by a court if an employer does not comply.
Any other ways of increasing transparency which would limit the cost for employers, such as reporting to the government through the pay-as-you-earn system.

Next steps

The consultation closes on 6 September 2015. The government has stated that the results will be published in winter 2015, with draft regulations expected to be published in the first half of 2016, although it has said that it may choose to delay implementation in order to give employers time to prepare.

The consultation suggests that the government is fairly open-minded about how, and even whether, to proceed. Given the potential sensitivities of the new disclosure obligation, employers might want to consider whether it is worth investing time over the coming weeks to respond to the government's consultation in order to ensure that their concerns are taken into account.

Employers might also want to start thinking now about whether more systematic monitoring of gender pay differences will help them prepare for the new disclosure obligation, including whether an equal pay audit might identify any potential gaps.

Paul Harrison is Of Counsel, and Hilary Wilde is Head of Know How and Training, Employment, at Baker & McKenzie LLP.

The consultation is at www.gov.uk/government/consultations/closing-the-gender-pay-gap. Employers can respond online at https://dcms.eu.qualtrics.com/SE/?SID=SV_0ppaSxAXdKa6UJv or by email to [email protected].

Background to legislative change

Section 78 of the Equality Act 2010 (section 78) contains a power for the government to introduce regulations which would require both public and private sector employers with 250 or more employees to publish information showing whether there are differences in the pay of their male and female employees. The provision was included by the then Labour government as a reserve measure that would be brought into force if voluntary reporting of gender pay gap information proved to be ineffective.

A voluntary reporting initiative "Think, Act, Report" was launched by the coalition government in 2011, and over 250 employers signed up to it, but only five employers actually published their gender pay gap information (see feature article "Private sector equal pay claims: the next big thing?").

As one of its last employment law reforms before the 2015 general election, the coalition government included a provision in the Small Business, Enterprise and Employment Act 2015 to require section 78 to be brought into force within a 12-month period (see News brief "Gender pay reporting: a new lease of life").

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