Gender pay gap reporting became mandatory for large private and voluntary sector employers, who have 250 or more employees, from 6 April 2017 (for public sector employers this was 31 March 2017) to report various aspects of pay data in April every year. Nearly half the UK workforce are affected by these reporting rules, accounting for more than 15 million employees.
In this advice piece, you'll find out:
- The background to gender pay gap reporting
- What is the law governing gender pay gap reporting and who does it apply to?
- Which employees must you report on?
- What do you have to do? What should be in the report?
- How is the gender pay gap calculated?
- What if your organisation does not comply with the obligations?
The background to gender pay gap reporting
According to the Confederation of British Industry (CBI), throughout the UK women hold 60% of the lowest paid jobs while men make up 60% of the top paying jobs.
The national pay gap between men and women in 2016 was just over 18% for all workers and 9.4% for full-time staff, according to government statistics. The second year of reports showed a median gender pay gap of 9.6%, with 45% of reporting employers seeing an increase in their gender pay gap on 4 April 2019. One of the causes of this might have been employers recruiting more women at lower paid positions to tackle wage disparity in the longer term. Another reason might be that a higher proportion of women work part-time (41% compared to 11% for men) and the number of part-time women increased by 1.2% from 2019-2020, whereas the number of part-time men decreased by 2.5%. Interestingly, part-time men are actually paid less on average than part-time women. This is probably because women in higher paid roles are more likely to seek part-time work while their male counterparts in the same or similar roles tend to work full-time.
It must be remembered that any gender pay gap within an organisation and equal pay in that same organisation are two different things. A gender pay gap is the difference in average earnings between men and women. Equal pay is paying men and women the same amount to do the same or similar job and this has been a legal requirement since the mid 1970’s. So how is it, you may ask, there is a gender pay gap if unequal pay has been illegal for over 40 years? According to Ann Francke, chief executive at the Chartered Management Institute, the answer lies in the fact the gap in most cases is not caused by unequal pay but instead reflects the ‘failure to achieve a balance of men and women in senior management roles, or to attract and retain women in some of the better remunerated occupations’.
If your business is required to report on the gender pay gap, we’ve listed some key questions below and provided brief outline answers to help understand the basics.
What is the law governing gender pay gap reporting and who does it apply to?
Mandatory gender pay gap reporting for large private and voluntary sector employers came into force 6 April 2017 under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. It applies to all organisations employing 250 employees or more on the ‘snapshot date’ which is 5 April in the relevant year. Due to the Covid-19 pandemic the Equality and Human Rights Commission has confirmed that in 2021 no enforcement action will be taken until after 5 October 2021. Meaning employers have until that time to complete and submit their reports, but are encouraged to submit them ahead of time, where possible.
Which employees must you report on?
For the headcount (250 or more employees), an employee is anyone employed by your organisation under a contract for service, a contract of apprenticeship or a contract personally to do work. It therefore includes employees, casual workers and possibly some contractors. The headcount would therefore include partners and LLP members.
However, the gender pay gap reporting duties only applies to ‘relevant employees’ employed on the snapshot date of 5 April in the relevant year. This definition of ‘relevant employees’ excludes partners and LLP members. The current thinking is that non-executive directors are also not included as ‘relevant employees’, however casual workers and bank staff directly employed by your organisation and those workers under are zero hours contracts are included.
Genuine agency staff will not count in the 250 or more headcount nor as ‘relevant employees’.
What do you have to do? What should be in the report?
Your organisation must analyse its gender pay gap each April and publish the report within 12 months. The report must be published on your organisation’s website and must be kept online and publicly available for 3 years. Your organisation must also upload the information to a government website.
The report is required to include:
- Overall gender pay gap figures for relevant employees, calculated using both the mean and median average hourly pay.
- The proportion of men and women in each of four pay bands (quartiles) based on your organisations overall pay range.
- Information on your organisations gender bonus gap (that is, the difference between men’s and women’s mean and median bonus pay over the relevant 12-month period).
- The proportion of male and female employees who received a bonus in the same 12-month period.
- A written statement by an appropriate senior individual within your organisation confirming that the published information is accurate.
- Your organisation then has the option (not mandatory but is encouraged) to include any explanation or ‘supporting narrative’ for any pay gap or other disparities and setting out what action, if any, your organisation plans to address them.
How is the gender pay gap calculated?
The gender pay gap is expressed as a percentage, calculating the difference between the average hourly pay of all male employees and female employees. If the average male pay is A and the average female pay is B, the formula is:
(A-B)/B x 100
There are 2 calculations for average pay of males and females, the mean average (sum of all values in the list divided by the number of values in the list) and the median (mid-point value when the values are sorted in ascending order). Calculations on both mean and median averages are required for the report.
What if your organisation does not comply with the obligations?
Remarkably the regulations have no enforcement provisions.
As the regulations are provided under the Equality Act 2010, the Equality and Human Rights Commission (EHRC) will be able to use its existing powers of enforcement under the Act, however this is unlikely to happen in practice and, in any event, the EHRC is unlikely to have the resources to police it.
The regulations have been criticised for not containing any enforcement mechanism or any sanctions for failing to comply with the reporting obligations or for publishing inaccurate or misleading information. There is also currently no suggestion that non-compliant organisations will be named and shamed.
The government has stated it will run checks to discover non-compliance, publish tables of reported gender pay gaps and establish a database of compliant employers. It therefore appears the only way of policing the requirements to publish the report is for members of the public to check whether an organisation has complied with its gender pay gap reporting obligations by visiting the government’s gender pay gap website. This could be someone who is thinking of your organisation as a potential employer or someone from a public or other government body that your organisation currently contracts with. So non-compliance by your organisation may, indirectly, affect current contracts as well as recruitment and future contracts.