Gender pay gap - top 12 FAQs
Partner, Veale Wasbrough Vizards
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 are now expected to come into force in April 2017, following delays in the publication of the final Regulations.
Employers should now be starting to think about their obligations under the Regulations before they come into force. The below FAQs seek to address some common queries in relation to the Regulations.
These FAQs are based on the draft Regulations and we are still waiting for the final form Regulations and accompanying guidance. We have therefore based our answers on the information that is currently available to us to give as clear a steer as possible at this stage.
Which organisations do the Regulations apply to?
The Regulations apply to private sector employers (including charities) with 250 or more employees.
Do self-employed staff count as employees?
Individuals who are genuinely self-employed fall outside of the scope of the Regulations.
Staff who are provided through cleaning, catering or IT companies (or similar) should be excluded. Agency workers are also excluded.
Do casual members of staff count as employees?
The definition of ‘employees’ is broad. It will include most casual staff who have ‘umbrella’ agreements with employers to undertake work as and when required.
It will also cover any other member of staff who works on 30 April, even if there is no ongoing contractual arrangement.
When is it necessary to produce the first report?
The first report will be based on pay data captured on 30 April 2017. The first report can then be published at any time from 1 May 2017 to 30 April 2018.
It will then be necessary to publish reports annually thereafter. For example, for the pay reference period April 2018, no later than 30 April 2019.
What information needs to be reported on?
Five separate reports are required under the Regulations:
- The difference in mean pay between genders (expressed as a %).
- The difference in median pay between genders (expressed as a %).
- The difference in mean bonus payments between genders (expressed as a %).
- The proportion of men and women in the workforce that received a bonus.
- The number of men and women in each quartile of the pay range.
We recommend that employers produce a narrative to accompany the requisite reports.
How do you undertake the calculations which underpin the reports and what is the gross hourly rate of pay?
The reports on mean pay difference, median pay difference and the pay quartiles are all based on establishing the gross hourly pay rate for each employee.
The gross hourly rate of pay is defined in the Regulations as weekly pay divided by weekly basic hours.
Weekly pay is based on the pay received in the pay period including 30 April. The Regulations specify which elements of an individual’s pay should be taken into account and which should be excluded.
What happens if we operate a salary sacrifice arrangement?
In accordance with the Regulations, the pay figure should be taken after the deduction of the value of any salary.
This may create an artificially low gross hourly pay rate for employers that operate salary sacrifice schemes which you may wish to explain in the accompanying narrative.
What if an employee works irregular hours?
In the event that an employee works irregular hours, we would recommend that an average is taken, perhaps using a 12 week period. Overtime should be excluded.
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What if an employee does not have defined contractual hours?
There is no clear guidance as yet and this could be a particularly contentious area.
If you have contractual hours, then even for those staff who work in excess of such hours, we suggest you use the contractual figure. Alternatively, a sensible assessment should be used, focusing on the hours they are contractually required to be at work.
What is a pay quartile?
It is understood that employers will be required to divide the workforce into four equal groups based on their gross hourly pay rate and then show the proportion of genders in each group.
Can organisations calculate gross hourly rate in a different way?
Many employers have an hourly rate for staff members which is used for payroll or other purposes.
Although it is likely to be convenient to use these figures employers need to appreciate that this approach may not strictly accord with the Regulations, which have a specific definition of which elements of pay should be included and excluded.
If, as an organisation, you are going to depart from adherence to the Regulations, we suggest you ensure you can explain the figures used and adopt a consistent approach. It is important to consider whether there is anything within your own method of calculation that could taint the data on the grounds of gender.
What should we be doing to prepare for the Regulations?
We recommend that in the first instance employers ensure that they understand their own data and that it is accurate and can be relied upon. It is also necessary to understand the information required to produce the reports and consider the most effective way of capturing this.
It is worthwhile doing a practice run (perhaps with the benefit of legal privilege) to ascertain the extent and nature of any pay gap.
Analyse whether the reports create any legal, organisational or reputational risks, and consider a strategy to address these.
Take steps to ascertain the cause of any pay gap so that this can be explained in the narrative or so you can consider the options to close the gap (if appropriate to do so).
For all organisations, it is helpful to have a transparent and robust pay policy so that everyone within the organisation understands how pay decisions are made.