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Law for Business

Knowhow - guidance - precedents

31 MAY 2017

MIND THE GAP: Gender Pay Gap Reporting

MIND THE GAP: Gender Pay Gap Reporting
1970 saw the introduction of the Equal Pay Act, yet these is still evidence of unequal pay for the same job.

2017 sees the introduction of the Equality Act 2010 (Gender Pay Gap Information) Regulations which imposes the requirement on organisations to publish a report on the average pay levels between the genders. But will this have any impact on the level of pay or the difference in pay arrangements between the genders?

This new Regulation applies to organisations in the private and voluntary sectors with 250+ employees, so it will not apply to the smallest businesses, but the definition of employees for the purpose of this Regulation is wide and will include contract workers and self-employed workers engaged by the employer, but not agency workers who are accounted for by the agency. Similar provisions will also apply to the public sector. It is therefore likely to capture many organisations.

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The purpose of the Regulations is to require publication of aggregated pay for men and women engaged in the organisation to see whether there is indeed a gap between the average pay of one gender compared to the other. It will also look at bonus payments received by the genders. Data to be used for the first report is that at 5 April 2017 (private and voluntary sectors) and 31 March 2017 (public sector). The organisation then has 12 months to publish the data and findings on its website. It will also be published on the Government website. Therefore it will be publically available information.

The calculations which are required to be published are:

  1. average gender pay gap as a mean average
  2. average gender pay gap as a median average
  3. average bonus gender pay gap as a mean average
  4. average bonus gender pay gap as a median average
  5. proportion of males receiving a bonus payment and proportion of females receiving a bonus payment
  6. proportion of males and females when divided into four groups ordered from lowest to highest pay.

However because the calculations are averages and the wages aggregated, it is quite likely to be misleading in a number of cases and takes no account of the workforce’s gender composition. One can image a report which shows a distinct gap between the genders where the workforce is primarily women on hourly minimum wage, perhaps on a production line or providing care services, and the management consists of men of average pay. This would be viewed as a “bad report” clearly showing a significant gender pay gap and perhaps being interpreted as an organisation where there is sex discrimination or serious inequality. However the reasons for the gender pay gap are complex and overlapping and, in part, reflect the underlying differences in the jobs that men and women take, the concentration of one gender in certain jobs and the relative pay for those jobs.

It is important that the statistics are not read as automatic evidence of sex discrimination against either gender. There may be many justifiable reasons why the report will show one gender receiving higher average pay compared to the other, be that due to the skill level required for the job or the number of hours worked. It is for this reason that businesses need to consider what narrative should be included with the report by way of explanation to the reader and contextualisation for the statistics.

The Regulations do not provide any sanction where there is a gender pay gap. However like certain other pieces of recent legislation that requires reporting, it is likely that lobby groups and other concerned parties will be watching with interest what comes out in the first wave of reports. The report will also be available to employees and customers, both current and future, as well as competitors. It is for this reason that businesses are likely to want to take advantage of the ability to provide a narrative and explain any reasons for the gap, as well as the actions they are taking to reduce or eliminate the gap to both ensure there is no direct or indirect sex discrimination and also to address any unjustified pay gap between the genders.

It is important to remember that these Regulations are not intended to deal with equal pay. As the ACAS website helpfully states: Equal pay deals with the pay differences between men and women who carry out the same jobs, similar jobs or work of equal value (it is of course unlawful to pay people unequally because they are a man or a woman). The gender pay gap shows the difference in the average pay between all men and women in a workforce. If a workforce has a particularly high gender pay gap, this can indicate there may a number of issues to deal with, and the individual calculations may help to identify those issues for further analysis and action, the aim being to eliminate the gender pay gap.

Although Government statistics show that the UK gender pay gap at just over 18%, is the lowest it has ever been, it is hoped that the analysis and reporting required by the new Regulations enable meaningful discussion on the reasons for the gap and practices to evolve to further reduce and eventually eliminate the gap. In the meantime “Mind the Gap”.

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