The long awaited draft regulations and government response to its closing the gender pay gap consultation has now been published.
Employers will be grateful that they finally have answers to their questions on the who, what, where and when, however are unlikely to be thankful for the mammoth task that they now have ahead of them. Far from reporting a single figure, employers will be required to report a whole lot more.
What’s more, new ‘league tables’ of employer’s gender pay gaps will be published in a ‘name and shame’ approach. But with sectors such as manufacturing struggling to recruit women and consequently having a higher than average gender pay gap? Could this new name and shame strategy result in a blame game?
Let’s start with a quick (it’s not actually going to be quick) look at those all-important – who, what, where and when….
Employers with 250 or more relevant employees will fall within scope of the regulations. A relevant employee means someone who ordinarily works in Great Britain and whose contract is governed by UK legislation. Government has stuck to the initial Section 78 of the Equality Act and is running with the 250+ employee threshold.
The regulations will require employers to publish their gender pay information in English on a searchable UK website that is accessible to employees and the public. *Cue some employers stating they don’t have a UK website* Employers will be required to retain this information online for three years to show progress has been made. The figures will need to be accompanied by a written statement confirming that the information is accurate
In addition, employers will be required to send evidence of compliance to a government-sponsored website. This sounds a little bit like where we are moving to on modern slavery reporting….?
Overall gender pay gap – mean and median
The draft regulations require employers to publish overall gender pay gap figures calculated by both the mean and the median. (Google this now if you can’t think back to your GCSE/O-Level days of mean, median and mode).
The government is defining ‘pay’ in the same way as the Office of National Statistics (ONS) does for its Annual Survey of Hours and Earnings (ASHE). Therefore ‘pay’ includes basic pay, paid leave, maternity and other family pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through payroll and on-call allowances).
Interestingly it excludes overtime. I say ‘interestingly’ as some may argue that on-call could be considered overtime, but we won’t go into too much detail on elements of pay, otherwise my holiday pay nightmares might come flooding back!
Employers will need to report both the mean and the median. Now this is a slight move away from the ONS, where the figures are focused on the median. This had been EEF’s preference going forward.
The regulations will require employers to calculate the gender pay as using data from a specific period every April from 2017, with an April reference date largely avoiding season fluctuations in the workforce. Again following ONS methodology employers will need to calculate an hourly pay rate for each relevant employee.
Bonuses with a 12 month period – mean
Employers will also need to separately analyse all bonus payments made in a 12 month period and publish difference between men and women. This will be the mean difference; with the government arguing that the mean takes into account the full distribution of bonuses paid by an employer. The calculation will only compare those employees who receive bonuses (as opposed to those that do not qualify). However, they will also be required to public the proportion of male and female employees that receive a bonus.
And now for something new – salary quartiles
Employers will be required to report on the number of men and women in each quartile of their pay distribution. Quartiles split an ordered data set into four equal groups, where each group contains a quarter of data. Employers will need to calculate their own salary quartile based on their overall pay range. It’s still a bit unclear whether this will be the number of employees within these quartiles or the proportion (e.g. 5 women, 5 men or 50% women and 50% men). If the former, then this would be worrying as you may only have a few employees in a quartile therefore disclosing a lot of information, or even identifying certain employees.
Telling the story – supplying a narrative
The government has listened to calls from EEF and others that a narrative should be voluntary, however the government has emphasised in its response that a narrative will be ‘strongly encouraged’ within future guidance. We expect that many manufacturers will want to supply a narrative to give a better picture of the wider factors affecting their gender pay gaps.
Regulations will require the first publication to occur within 18 months of their commencement and annual publication thereafter. If the government commence regulations in October 2016, employers will then have six months to prepare a preliminary data snapshot in April 2017. They must then analyse and publish the required information by April 2018 on a date of their choosing.
Employers will be required to report annually in order to promote transparency and demonstrate progress and as mentioned previously keep the data for a period of three years.
And if you don’t do it? The name and shame tactic
Government wants to produce publically displayed tables by sector of employers’ reported pay gaps. Beyond that, government would aim to identify and highlight employers publishing full and explanatory information.
Government may also publicise the identity of employers known not to have complied. Currently, it doesn't intend to create any additional civil penalties in the regulations, however it will keep this position under review.
Have you got all that? If not, let’s summarise the data you need to share
Employers will be publishing:
Mean overall gender pay gap
Median overall gender pay gap
Mean bonus gender pay gap
Proportion of men and women that receive a bonus
Earnings distribution of men and women by quartile
Anyone else thinks that’s a lot of information to digest?
Wow, that’s a lot of data to digest. Recent research showed that a growing number of women would consider an employer’s gender pay gap when applying for a job – but were those asked given all the information above? Does it not confuse rather than clarify the situation?
‘Name and shame’ could lead to a blame game
Not only will employers need to report on all of this information the Government will then turn this information into a league table of sectors to demonstrate who has, or hasn’t made progress and to help stakeholder identify which sectors, and employers have larger than average pay gaps.
But we know that industries like manufacturing that struggle to recruit women will undoubtedly have a higher than average pay gap? Some will blame employers, perhaps suggesting that such workplaces aren’t ‘female-friendly’ or don’t offer as much flexibility. Employers will turn to the education system and highlight the worrying low numbers of young girls studying STEM, which therefore diminishes the pipeline of talent into the industry.
There is a worry then that this new name and shame could simply lead to a blame game.
Have the myriad of additional requirements distracted from the cause?
Manufacturers are fully behind the principle of gender pay transparency and work tirelessly to get more women into, and progressing through our sector. Gender pay reporting had the potential to shine the spotlight on a single, clear figure, that could then be tracked, compared, and encourage action. But the myriad of additional requirements, seem to be nothing more than a distraction. If this is the case, this really seems like a lost opportunity.