With Brexit at the front of most HR professionals’ minds, you could be forgiven for pushing the gender pay calculator to one side for the moment. Nobody needs any more reasons to panic!
Without wanting to rush you, this year’s 4th April deadline is starting to come into focus. It’s worth taking a moment now to reflect on some of the lessons to be learnt from the first year of gender pay reporting (particularly, if you haven’t yet crunched numbers for 2017/18).
Lesson 1: What did the last year’s figures tell us?
There weren’t any big surprises, except perhaps that 10,252 in-scope employers produced reports, achieving 100% compliance according to the Equality and Human Rights Commission (EHRC)! Although, admittedly, this was after some prodding letters and phone calls from the EHRC.
77% of employers reported a median gender pay gap in favour of men and 53% reported a median gender bonus gap. Only 33% of employers reported an upper pay quartile that had over 50% women. In contrast, 57% of employers had more women than men among their lowest paid employees. According to a report by the Government Equalities Office (GEO), “This trend towards imbalance is the fundamental cause of the GPG.”
The statutory figures are set against a backdrop of the Office for National Statistics (ONS) announcing the UK average gender pay gap in 2018 for all employees being 17.9% (and 20.3% for the manufacturing industry). It’s clear that there is still plenty of work to be done to bring these figures down.
Lesson 2: What could have been done better?
Most in-scope employers were ‘eleventh hour’ reporters, with 87% of private and voluntary sector employers publishing their figures in the last month before the deadline and almost half of these taking it to the last week!
Why did so many employers leave it all to the last minute? The gender pay calculations don’t use complicated formulae. The real challenge wasn’t the maths but collating the data. Payroll is often messy with lots of obsolete codes and ‘ad hoc’ corrections. In larger organisations, handling the sheer volume of payroll data for gender pay purposes was overwhelming and very time consuming.
Another difficulty came with identifying the correct classification of remuneration as either ‘pay’, ‘bonus’ or ‘excluded’. There were many grey areas in the legislation which required a significant amount of thought time.
On a practical note, a key lesson to take from the above is not to leave the ground work to the last minute. The final calculations can be done very quickly but getting the figures lined up certainly isn’t an overnight job.
Lesson 3: Do we have to do anything differently this year?
Strictly speaking, there are no new legal requirements for the second year of gender pay reporting.
In August 2018, a Business, Energy and Industrial Strategy (BEIS) Committee report called on the Government to make various changes to the gender pay legislation including an extension of its scope to smaller employers and the introduction of mandatory narratives to explain gender pay report figures. Earlier this month, the Government rejected most of the Committee’s recommendations for the time being.
However, from an employee and public relations perspective, there is a strong push from the EHRC, GEO and Acas towards publishing not only an explanatory narrative alongside a gender pay report but also an action plan which looks at ways to actually tackle a gender pay gap (rather than simply providing an explanation of the causes).
The GEO has produced guidance on the kinds of actions employers should be including in their action plans (see ‘Reducing the gender pay gap and improving gender equality in organisations: Evidence-based actions for employers’ (August 2018).) A recent EHRC report also calls on employers to include explicit references to “time-bound and target-driven activities” (‘Closing the gender pay gap’ (December 2018).
While explanatory narratives and action plans are not obligatory, we would recommend that employers consider these options carefully. Without a narrative, gender pay gap figures can be, at best, fairly meaningless and, at worst, can lead to negative assumptions being drawn. An action plan which sets out realistic ways to reduce a gender pay gap can also help publicly demonstrate an employer’s commitment to creating a fairer workplace.
Lesson 4: What’s in the pipeline?
Although there aren’t any changes to the gender pay legislation, there have been some new developments in relation to other areas of pay and equality.
In October, the Government launched a consultation on the introduction of mandatory ethnicity pay gap reporting for employers with 250 or more employees. Ethnicity pay gap reporting is intended to help remove barriers to workplace progression faced by ethnic minorities. In its consultation, the Government considers the challenges of gathering ethnicity data and the implications of various possible methods of reporting ethnicity pay information.
On 1 January 2019, the Companies (Miscellaneous Reporting) Regulations 2018 came into force. These Regulations will require UK listed companies with more than 250 employees to disclose annually the ratio of their CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees. In-scope companies will need to complete their executive pay ratio reports in 2020 (covering CEO and employee pay awarded in 2019).
Lesson 5: Will there be any naming, shaming or wrist slapping?
In March 2018, the EHRC published an enforcement policy summarising its approach to enforcing the gender pay gap regulations. This includes its ability to investigate non-compliant businesses and issue unlawful act notices and fines for failure to comply.
Although there have been many rumblings over the legal validity of the EHRC’s enforcement powers, the Government has taken the view that the enforcement policy provides sufficient certainty (although it would be prepared to act further and assert the position if required in future).
In spite of initial concerns, the EHRC do not appear to be using any blatant ‘naming and shaming’ as part of their enforcement process. The prospect of Government league tables also appears to have been dropped for now. However, as we have seen in the months that followed the publication of the first gender pay reports, there is plenty of scope for wrist slapping by the media.
Reputational risk is very real and we saw many national newspapers compiling their own league tables or lists of ‘worst offenders’ when the first gender pay reports were published. The key lesson to be learnt in terms of enforcement is that the gender pay rules most definitely have ‘teeth’ even if those teeth don’t have statutory roots.
WHAT NEXT? Come along to our seminar 'Gender pay gap reporting: lessons learned and next steps' to learn more. Click here to book.