Gender pay gap reporting: new guidance issued for private and voluntary sectors

It is estimated that over 1,000 voluntary organisations will be subject to the new obligations (see below for who needs to report). The guidance is currently in draft form pending approval of the final regulations. However, the new regime is expected to take effect in April 2017 and so those charities affected should be making a start on their final preparations now.

Who will need to report?

All British employers with 250 or more employees will need to comply with the new reporting obligations.

There is no explicit definition of “employee” in the regulations, but it seems likely that the extended definition of employment in the Equality Act 2010 will apply. That means that workers (and potentially some self-employed people) as well as employees in the strict sense count towards the threshold and need to be included in the figures reported.

The guidance suggests that while agency workers are included, they should be counted by the agency providing them and not by the end user of the agency services. The guidance states that each part-time worker will count as one employee, therefore you should not look at “full time equivalents”. Employees working overseas may also need to be included.

The new regime commencing in April 2017 only applies to commercial organisations and charities, but it has now also been confirmed that specified public bodies, including NHS trusts, universities, further education colleges, local authorities and a wide range of other public sector and quasi-public sector organisations, will need to publish their gender pay gap data by 30 March 2018. Substantially the same requirements will be imposed on the public sector.

What needs to be reported and when?

Employers will need to publish the following sets of data, calculated as at the “snapshot date” (which will be 5 April each year, starting in 2017):

• The gender difference in mean and in median hourly pay
• The gender difference in mean and in median bonus pay during the year prior to the snapshot date
• The proportion of male and female employees who received bonus pay during that period
• The proportion of male and female employees according to quartile pay bands

Broadly speaking pay is the gross hourly pay for normal working hours, excluding overtime but including allowances and bonuses attributable to the relevant pay period. There are complex rules for working this out. They have a lot in common with the rules on calculating a week’s pay for employment protection purposes, although the focus is on constructing representative hourly rather than weekly gross pay.

Employees who are not on full pay because they are on leave for any reason on the snapshot date should be excluded from the gross hourly pay figures.

Bonus pay is not to be calculated on the basis of an hourly rate, but using a cumulative annual figure including not only cash bonuses but any taxable earnings attributable to awards under share schemes and long-term incentive plans which have accrued in the relevant period.
The pay information must be published within a year of the snapshot date. The final deadline for the first annual set of statistics will therefore be 4 April 2018. However, the guidance encourages employers to publish their results as soon as possible after April 2017 in order to be seen as leaders in their sector.

The guidance confirms that employers must comply with the regulations for any year in which it has a “headcount” of 250 or more employees on 5 April. It however encourages employers of all sizes to consider the advantages of reporting.
 

Will employers have to provide an explanation of any pay gap?

No. Employers will be encouraged, but not obliged, to provide a commentary on the figures. The guidance suggests that this commentary could include an explanation for the reasons for the results as well as detail about actions that are being taken to reduce or eliminate the gender pay gap. The guidance also encourages employers to explain challenges they face in reducing the pay gap and explains that employers could also showcase any successes they have had. Employers will need to find the right balance and think carefully as to what commentary it provides.

Where must the information be published?

The employer must publish the relevant data on its website and keep it there for at least three years. Employers will also be obliged to upload it onto a website specified by the Government. In both cases the data must be accompanied by a written statement confirming its accuracy.

What are the penalties for non-compliance?

The regulations do not set out any civil or criminal penalties for non-compliance, though this is to be kept under review. However the Government has indicated that in its view failure to comply will be an “unlawful act” which would enable the Equality and Human Rights Commission to take enforcement action.

In reality, however, compliance is likely to be driven by the risk of brand and reputational damage. As well as plans for highlighting examples of best practice, there are plans to “name and shame” organisations which fail to comply, with the hope that employers will take new or faster actions to reduce or eliminate their gender pay gaps.

How can I find out more?

The Acas guidance can be found here. It contains a useful step by step guide as to how to carry out gender pay reporting, including example calculations, as well as examples of how organisations might work to reduce any identified gender pay gap.