It is now 40 years since equal pay laws came into effect in the UK, but there continues to be a gap between what men and women are paid. The figures from the Office for National Statistics for 2014 show that the gender pay gap (based on median hourly earnings for both full and part-time employees) is currently 19.1%, reducing to 9.4% for full-time employees (www.ons.gov.uk/ons/dcp171778_385428.pdf). However, this is not the complete picture.

In the private sector, the gender pay gap for full-time employees is 17.5%. When broken down further by occupation, provisional figures for 2014 suggest that the pay gap for those in full-time senior or management roles is around 16%, increasing to nearly 25% for those working in skilled trades.

One possible approach to tackling the gender pay gap is to promote transparency by encouraging or requiring employers to identify and publicise the gender pay gap within their own organisations.

Section 78 of the Equality Act 2010 (section 78) contains a power for the Secretary of State to make regulations requiring private and voluntary sector companies with 250 or more employees to report on gender pay differences. The Labour government, which was in power at the time, included the provision as a reserve power to compel gender pay reporting if employers failed to do so on a voluntary basis. However, it was never brought into force.

The coalition government initially decided that it would not use the power. Instead, in 2011 it launched a voluntary disclosure initiative called "Think, Act, Report" to encourage companies to report on their gender pay gaps (see box "Think, Act, Report"). In addition, the government introduced an obligation for tribunals to order employers to carry out an equal pay audit and publish the results where they lose an equal pay or pay-related discrimination claim, which came into force in October 2014 (see feature article "Compulsory equal pay audits: bridging the gender pay gap").

Although over 250 companies have signed up to the Think, Act, Report initiative (covering over one fifth of employees nationally in employers with more than 150 staff), so far only five companies have actually published their gender pay gap information.

The government recently conceded an amendment to the Small Business, Enterprise and Employment Act 2015 (2015 Act) compelling the Secretary of State to make regulations under section 78 requiring private and voluntary sector companies with at least 250 employees to publish information on gender pay differences.

The 2015 Act received Royal Assent on 26 March 2015. The Secretary of State has 12 months to make the regulations, meaning that new rules requiring mandatory gender pay gap reporting will be in place by Spring 2016.

One difficulty in gender pay gap reporting is the issue of exactly what information should be reported. A gender pay gap can arise for many reasons, which can vary by industry and by organisation. For example, an employer may be unlawfully paying women less than men for doing the same job; equally, it may be lawfully paying its staff but certain lower paid roles may attract more female applicants, or more successful female applicants, or be predominantly carried out by women. There is therefore a challenge to identify what information should be disclosed to make the data meaningful.

Section 78 gives the Secretary of State broad powers to prescribe what information employers will need to publish, in what form, and the manner and time of publication. Publication cannot be more frequent than annually, however, and the penalty for an employer that fails to comply could be a criminal fine of up to £5,000 or civil enforcement measures.

The 2015 Act provides that the Secretary of State must consult on the details of pay gap reporting before the regulations are published, so employers will have an opportunity to try to frame the rules and to prepare before implementation.

It is difficult to know at this stage what approach will be adopted. The Equality and Human Rights Commission (EHRC) has consulted in the past on gender pay gap reporting as a precursor to the Think, Act, Report initiative, and this may give some guidance as to the approach that may be taken (see News brief "Unequal pay and sex discrimination: the workplace reality"; www.practicallaw.com/1-501-5128).

As part of its consultation, the EHRC sought views on the best means of reporting on the gender pay gap. It concluded that there was a strong level of opposition to the use of a single figure to report on the gender pay gap. The EHRC suggested that employers should have a range of options to choose from:

At the time, it was proposed that companies employing 500 or more employees use at least two of the reporting measures, with companies employing between 250 and 499 employees reporting against at least one measure. However, a new government might revisit this approach.

With all the major political parties committing to the introduction of gender pay gap reporting in their election manifestos, it appears as though gender pay reporting is here to stay, at least for the medium term.

The consequence for larger employers is that they will have both the new gender pay gap reporting obligations and the possibility of being ordered to carry out an equal pay audit in the event that they lose a relevant tribunal claim.

While this is a positive step for gender diversity, employers will need to start thinking now about whether to start monitoring gender pay differences more systematically, or conduct an equal pay audit to identify where pay gaps might exist. This would enable them to prepare for potential negative publicity or address issues at an early stage. However, this has to be balanced against the risk of creating material that might need to be disclosed in litigation at a stage where gender pay reporting has not yet been implemented.