UK: The Gender Pay Gap, And The Latest Government Plans

45 years on, the statistics which are constantly provided show a stubborn continuation in disparity between the pay of men and women.

Whilst statistics can always be criticised – and are only one step toward understanding whether there is a problem, and indeed what that problem is - the Government has stated a new intention to tackle this.

As a result, we are now going to see the advent of compulsory gender pay reporting – with the Government today issuing its consultation paper on the area.

This note sets out the issues raised in the consultation paper.  It also considers what companies should be doing now to prepare.  And finally, it touches on the potential risks that will need to be considered in tackling this sensitive topic.

The background

In revising discrimination laws in 2010, the Labour Government introduced the "option" of introducing rules requiring private employers with at least 250 employees to publish information to show whether there are differences in pay between male and female employees in their organisation.

The Coalition Government in 2010 did not take this option up.  Instead  they introduced gender pay reporting on a voluntary basis, under the Think, Act, Report initiative.  This was principally aimed at employers with at least 150 employees. Perhaps unsurprisingly, this scheme has had little impact. Although over 250 companies signed up to it, it was reported in August 2014 that only four companies had published their gender pay gap information through the scheme.

What has now happened?

Blunt statistics show a continued disparity in pay.  David Cameron has stated that he wants to eradicate the gender pay gap in a generation.  It is clear that more needs to be done to look to achieve this – and the Conservative Government sees compulsory gender pay reporting as the tool to do this.

The consultation paper issued today can be found by clicking here.

What will companies have to do?

The Consultation Paper is light on detail – although it is clear that the new rules will only apply to companies with 250 or more employees.

The key question employers will ask is what information – and what level of information – will need to be given.  Employers will also want flexibility to ensure that misleading statistics – which don't take into account the work which is actually done – are properly explained or categorised.
The Government is therefore considering various options which employers would have to use to report gender pay information. These appear to be:

• An overall figure arrived at by calculating the difference between the earnings of men and women as a percentage of men's earnings
• Gender pay gap figures broken down by full-time and part-time employees
• Gender pay gap figures broken down by grade or job type.

From an initial review of these options, the real problem appears to be that many employers will not have grade / job type structures which accurately reflect roles as against pay.  The options also do not reflect location.  Even from this initial review, therefore, a concern can be identified that the reports / statistics which are produced may not actually accurately reflect whether people are receiving equal pay for equal work.  The consultation seeks views from employers on whether they have existing data and systems in place that can show the figures needed to report on each of these options.  It is very important therefore that employers engage with the consultation – to ensure that what they are required to produce is both possible, and also reflects the reality of equal pay (and is not misleading).  Ultimately this may lead to a situation whereby the level of detail in responses potentially becomes unworkable, but that is something we all (and the Government) need to think through carefully in this consultation.

The consultation also covers the issue of whether any additional narrative information should be provided and if so, what form that should take. Employers are asked to provide information on the estimated costs and time involved in conducting gender pay analysis and publishing the information.

Businesses are also asked to comment on how frequently the information should be published - annually or every 2/3 years, and when the reporting dates should be.

What does this mean for employers?

The new rules are expected to come into force by March 2016.  Following this date, there is likely to be a phased implementation. We do not know what this will look like but the working assumption is that there will be a lag time from when the rules come into force, until we see the first reports in 2017.  It is likely that larger companies (500+ employees) will have to publish the information earlier.

So employers should, at this time, review the consultation paper, and submit responses.  We will be submitting a response, so are happy to include any views or points in our response, please just get in touch with Chris Holme or Corinna Harris.

The temptation for employers is to start getting "their houses in order".  And whilst many employers have previously resisted this temptation – due to a desire to avoid creating documentation which could be used against them in an equal pay or discrimination case – given that compulsory reporting is now coming in, we recommend that employers review this approach and consider whether or not to update it.

Of course, although this may be secondary to the risk of future equal pay claims, employers will face increased administration costs in order to gather and report this information.  Publishing gender pay information is likely to mean that more equal pay and sex discrimination claims will be brought. However, what is most significant for businesses is undoubtedly the risk of reputational damage arising from negative publicity over gender pay gap issues.

The consultation closes on 6 September 2015, and draft regulations are expected early 2016.