30 July 2015 - Post by:Felicity Gemson
The Government has recently launched a consultation seeking views on the detail of new gender pay gap reporting obligations for employers with 250 or more employees. The consultation is collaborative in its approach, posing a series of high-level questions relating to the appropriate format, frequency, cost implications and enforcement process for gender pay gap reporting, and giving employers an opportunity to shape the final rules. Key points are as follows:
- Format of information?: Respondents are asked in how granular a form they can calculate gender pay differences from existing data and systems, ranging from an overall figure across the workforce, to a breakdown of figures by grade or job type. We anticipate that the final rules may entail the more granular format if employers are expected to conduct a meaningful comparison of pay levels and to identify and address any pay gaps; and some employers are already preparing on this basis. Figures published may have to be accompanied by a narrative – to provide context, an explanation of any pay gaps and the remedial action being taken to address such gaps.
- Published where?: Views are sought on where gender pay gap information should be published, and the extent to which this should be prescribed. If employers must publish the information on their website, we expect that confidentiality safeguards and exemptions will be a primary concern, particularly if the disclosure includes a breakdown of pay differences by job or grade.
- How often?: The Equality Act requires the publication of gender pay gap information annually at most. Views are invited on the options of annual, two-year and three-year reporting, and employers will no doubt be keen to lobby for a longer reporting cycle, both to reduce the cost and administrative burden that annual reporting would entail, and to leave a realistic window in which to address any pay gaps revealed by their last audit.
- When do the rules take effect?: The consultation process runs until 6 September, and the Government expects to make regulations in the first half of 2016, although implementation may be delayed to give businesses time to prepare. Implementation could be required from 6 April or 1 October (2016) or from 1 January (2017), or a phased approach may be adopted requiring larger employers (those with at least 500 employees) to publish their information earlier than those with 250 employees. A cut-off period would apply to limit the gender pay gap date that has to be disclosed.
The introduction of mandatory gender pay gap reporting is a positive step towards gender equality and will no doubt be welcomed by employees. Some companies are already undertaking audits voluntarily as part of their wider gender equality initiatives and over 280 companies have signed up to Think, Act, Report as part of this proactive approach. For most employers, however, this is new territory and the work involved, particularly for large organisations, should not be under-estimated. We recommend that work starts now to determine how employees should be categorised and graded (if a formal system is not in place), to identify suspected pay gaps and to fix any disparity ahead of the mandatory requirements, when such a disparity might have to be disclosed publicly.