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The 2015 Small Business, Enterprise and Employment Act (SBEEA) 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.
At the moment this only applies in England, Scotland and Wales; it was meant to be implemented in Northern Ireland from June 2017, but thanks to the continued suspension of the Irish Assembly, this doesn’t apply there yet.
The final draft of the regulations was published on 6th December 2016 and came into force on 6th April 2017. Government guidance can be found here.
The government have said that they will review the position after five years to determine whether other Employers should be bought in scope of the regulations.
At the end of 2017, the Equality and Human Rights Commission (EHRC) proposed a draft plan for enforcement action of the Gender Pay Gap Information Regulations.
In 2018, the EHRC identified what they described as “potentially inaccurate figures” submitted by employers. In a statement, they asked employers to correct or justify the data or risk of being taken to court.
In June 2018, the government issued draft legislation that requires UK listed companies with more than 250 employees to publish and justify the pay difference between their Chief Executive and their average UK worker’s salary on an annual basis.
The gap between this pay will be called the pay ratio. These new requirements were given parliamentary approval, so the requirement to publish this pay ratio began on 1st January 2019, and companies will need to report their ratios in 2020.
Businesses will also need to explain how their directors’ actions reflect the interests of their shareholders and employees, what responsible business arrangements they’ve undertaken and what effect a share price rise could have on executive pay.
In October 2018, the government started a consultation asking employers to contribute their views on mandatory ethnicity pay reporting. In brief, the options proposed are:
The consultation also asks what employers should be expected to publish this data – all employers, those with 50+ employees, those with 250+ employees, those with 500+ employees, or another threshold.
The consultation closed on 11th January 2019, but until April 2021 this was not heard of again. The Commission on Race and Ethnic Disparities published a report to say that legislation should not be necessary and ethnicity pay gay reporting should be voluntary. The government have not yet commented on the report, but it is now thought that legislation in this area will be unlikely. The Commission did urge the government to produce guidance to assist those employers who choose to voluntary report their pay gaps.
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 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’d have received better remuneration from their employer if they were of a different sex may have a claim, even if there’s no-one of the opposite sex doing equal work in the organisation. This would be a claim under sex discrimination.
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’s also worth being aware that in 2012, a landmark Equal Pay case delivered the verdict that workers now have six years (five years in Scotland) to make an equal pay claim in the High Court (rather than six 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). The Act also 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, such as a competitor organisation.
Will this have to change in light of the new reporting requirements? We’ll keep you updated!