It’s now just over a month since the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 came into force, requiring employers with 250 or more employees to publish a variety of metrics concerning the gender pay gap in their organisation. As the deadline for publication of the first year’s reports isn’t until 4 April 2018, you may be tempted to kick gender pay reporting into the long-grass, as something you can deal with later down the line.
However, now that the 5th April snapshot date has passed and you will have access to the required pay data, we would strongly recommend that you make a start on your gender pay reporting as soon as possible, given the extent of the necessary data-gathering exercise and the complexities of the calculations. At EEF, we were heavily involved in the development of the Government Equalities Office (GEO) & ACAS Guidance on gender pay reporting and we are now working to support our members as they begin to pull together their figures and compile their reports. Here we explain why now’s the time to get down to business with gender pay reporting, and below we share the top five pitfalls you should avoid, based on our experience so far.
Raw, naked data
The first pitfall can present itself right at the start of the process before HR have even had a chance to get the calculator out. Typically, when we have helped employers with gender pay reporting they will share with us a spreadsheet of pay data that they have pulled together with colleagues in their Finance teams. In most cases, employers have a good overview of the gender pay reporting requirements and, when faced with unwieldy Excel spreadsheets, there is a strong temptation for them to do some preliminary editing. This can be very dangerous. Manipulating the raw data based on a general overview of the rules can lead to vital information being removed and risks totally skewing the figures.
A classic example is deleting from the pay data spreadsheet all employees who are on leave. While such employees may rightly be excluded from some gender pay reporting calculations, they will need to be fed back in to other calculations and even the nature of the leave may have an impact on whether their data should be left in or out. The moral of this story is start your gender pay reporting exercise with raw, naked data – no dressing up or down.
Gender pay reporting calculations must be carried out using gross basic pay after salary sacrifices have been made. We have seen some employers’ spreadsheets itemise salary sacrifice as a ‘deduction’ and others which make no specific reference to salary sacrifice, with the result that it’s unclear whether any adjustment has been made. Whatever approach is taken, this needs to be checked at the start of the data gathering stage as it can make a significant difference to the figures if basic pay has not been adjusted for salary sacrifice payments.
Just because an element of pay is called an ‘allowance’ doesn’t necessarily mean that it is an allowance for gender pay reporting purposes. We have seen long service awards being classified as allowances when they are more likely to be bonus pay. And acting-up allowances, for example, can also sometimes fall within the definition of bonus pay, rather than allowances. Regardless of how payments are labelled by the employer, what’s needed is a thorough examination of the nature of each element of pay to make an informed decision as to which category it falls within for gender pay reporting.
There are several potential trip-ups with bonuses. The first can be described as a bad case of ‘over pro-rating’. ‘Bonus pay’ is included in the main gender pay gap calculations, but there are some detailed rules determining whether and how it should be pro-rated. It’s not uncommon for the intricacies of the rules to get lost along the way and we’ve encountered employers who have pro-rated bonuses when they shouldn’t have. This can throw the figures out quite significantly. The other frequent mistake with bonuses is including employees who have received zero bonuses in their gender bonus gap calculations. The Regulations make it clear that only employees who have actually received a bonus should be counted for this reporting metric.
Balancing the quartiles
Calculating the proportion of men and women in each of the four pay quartiles is not a complicated calculation. However, there are two steps which are often missed out when preparing the quartiles for calculation. The first common omission is failing to balance the number of employees across the quartiles where the total number of employees doesn’t divide evenly by four. For example, an employer that has 403 employees will have 100 employees in each quartile and three left over. The correct approach is to place each left over employee into a different quartile, not (as we have seen) place all three in the same quartile. The second mistake that we’ve seen is not checking whether there are a number of employees on the same hourly rate which cross more than one quartile. If this occurs, the employer needs to make sure that the number of men and women on the same hourly rate is proportionately allocated between the relevant quartiles.
How we can help
We are uniquely positioned to provide tailored gender pay reporting support, having worked closely with the GEO on the development of the legislation and guidance.
To find out more about how we can help lift the burden of the reporting process, from initial preparation and analysis to practical recommendations on how to reduce your gender pay gap, click here.