Updated June 2017.
The 2015 Small Business, Enterprise and Employment Act (SBEEA) has amended The Equality Act 2010 to require employers with 250 or more employees (in the private or third sector) to publish details of their gender pay gap. (updated December 2016).
The Government started its preliminary consultation in July 2015 to look at what data organisations will be obliged to present and how, and finally responded in February 2016 by publishing the requirements for employers to report gender pay gap information and issuing a draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016.
The draft Regulations are subject to further consultation which will close on 11th March 2016. In October 2016 it was announced that some significant changes may be made to the regulations which will bring more employers into scope of the reporting rules. The final draft of the Regulations was published on 6th December 2016 and the Regulations are scheduled to come into force on 6th April 2017. Government Guidance can be seen here.
What the new gender pay reporting will mean:
- All private and voluntary sector employers in England, Wales and Scotland will be required to publish this information, if they have 250 or more employees. In October 2016 it emerged this will become ‘relevant employees’ so will be a broader definition and could cover employees, apprenticeships and potentially workers/freelancers/Contractors with a contract personally to do work. Partners (including LLP members) are excluded.
- The Regulations require a preliminary ‘snapshot’ of data at 5th April 2017 to be made by the Employer to ensure they can fulfil their reporting obligations (this will be called the ‘snapshot date’ and will need to be the same date each year).
- The detailed pay gap information must be calculated and published by the latest April 2018 (the Employer can choose the date).
- Annual reporting will then be required.
- Employers must publish the ‘mean’ and ‘median’ gender pay gap, using an hourly pay rate for men and women (so the information is not distorted by number of hours worked).
- “Ordinary Pay” will include basic pay, paid leave, maternity pay, sick pay, allowances, shift pay, bonuses and other pay (e.g. car allowances paid through the payroll). It will not include overtime, expenses, value of salary sacrifice schemes and any benefits in kind or redundancy pay. Pay is to be calculated gross.
- The hourly rate to be used will be the rate at the employee’s pay period within which 30th April 2017 falls (the pay period is a week or a month, depending how often employees normally get paid).
- Employers who operate bonus schemes will have a separate requirement to publish the difference between the mean and median bonus payments made to men and women over a period of 12 months. Employers will also need to publish the proportion of male and female employees receiving a bonus. ‘Bonus’ is defined widely and includes commission.
- Employers will also need to report on the number of men and women in each quartile of their pay distribution. The regulations clarify what a ‘quartile’ is – the workforce should be split into four equal-sized groups from the lowest to the highest paid, organised by hourly rate.
- Employers may (voluntarily) publish a narrative to accompany the pay gap information, to explain any pay gaps and the context, and what actions will be taken.
- The information must be published on a UK website that is accessible to employees and the public. The information must be maintained for at least 3 years from its publishing date in order to allow tracking of their progress.
- The information must also be uploaded to a Government website which will be used to prepare and publish information showing pay gaps within particular sectors (the website was finally launched at the end of June 2017 and is available here).
- A Director of the company (or equivalent) must sign and confirm that the information is accurate.
- Currently no civil penalties for non-compliance are planned; the Government plans to ‘name and shame’ non-compliant Employers.
The Government have said that they will review the position after 5 years to determine whether other Employers should be bought in scope of the regulations.
Guidance and support for Employers is to be developed by the Government, to help them comply with these new requirements. We’ll update this article as things become clearer.
Employers may be concerned that this information may be used for equal pay claims against them. It is more usual at the moment for Equal Pay claims to be concentrated in the public sector, however these changes may mean more claims in the private sector.
Currently The Equality Act 2010 contains the previous legal framework that was in place for Equal Pay which means that in most circumstances a challenge to pay inequality and other contractual terms and conditions still has to be made by comparison with a real person of the opposite sex in the same employment (doing “like” work, “work related as equivalent” or “work of an equal value” to an employee of the opposite sex employed by the same employer or possibly an associated employer).
However, a change in the Equality Act 2010 allowed a claim of direct pay discrimination to be made, where no real person comparator can be found. This means that a claimant who can show evidence that they would have received better remuneration from their employer if they were of a different sex may have a claim, even if there is no-one of the opposite sex doing equal work in the organisation. This would be a claim under sex discrimination.
And a ruling by the Supreme Court at the end of June 2013 effectively handed women the legal right to demand the same pay as male colleagues doing a different job of ‘equal value’.
It is also worth being aware that in 2012, a landmark Equal Pay case delivered the verdict that workers now have 6 years (5 years in Scotland) to make an equal pay claim in the High Court (rather than 6 months to an Employment Tribunal).
The Equality Act 2010 also made it unlawful for an Employer to prevent or restrict their employees from having a discussion to establish if differences in pay exist that are related to protected characteristics (in the Equality Act) and outlaws pay secrecy clauses in contracts of employment.
An employer can currently require their employees to keep pay rates confidential from some people outside the workplace, for example a competitor organisation.
Will this have to change in light of the new reporting requirements? We’ll keep you updated!
If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.