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Gender Pay Gap Regulations Published

The Equality Act 2010 (Gender Pay Gap Information)  Regulations 2017 will come into force in April.

To summarise, the requirements introduced by the Regulations will be as follows:

  • The reporting obligation will apply to all private sector employers with 250 or more staff in the UK.
  • Employers will be obliged to publish the mean average and median average hourly pay gap between men and women. This does not mean you have to report the actual difference between the rates of pay in pounds and pence but rather the average difference expressed in percentage terms.
  • This information must be based on the pay period that encompasses 5th April each year. In other words, this is a snapshot at that point in the year, rather than looking at the pay differences over the course of the year. That date is defined in the Regulations as the “snapshot date”.
  • “Pay” for this purpose includes any bonuses paid in that pay period.
  • “Pay Period” means the interval of pay in which the employees are paid be that monthly, weekly etc.
  • Employers must also report the annual bonus gap between men and women (which, unlike the difference in hourly pay, does encompass bonuses paid over the course of the whole year up to the snapshot date), together with the proportion of male and female employees who received a bonus that year.
  • “Bonus” is defined widely to include commission and share schemes.
  • There is an additional obligation to publish the numbers of men and women in each of four quartile pay bands.
  • The first calculation date is 5 April 2017. The data must be published on the employer’s website by 5 April 2018, remaining there for three years.
  • The data must also be submitted to the Government who may produce league tables for certain industries.

There are a number of differences between the final version of the Regulations and the draft that was put out for consultation:

  1. The snapshot date has been changed from 30 April to 5 April. At first glance this appears that it could be significant in the case of employers who pay their staff weekly or fortnightly, particularly if annual bonuses are paid at the start of April (such payments would not have been caught in a weekly period containing 30 April). However, the Regulations require that an employer should calculate bonuses proportionate to the pay reference period and so the potential skewing effect of a bonus being paid at that time of year is reduced. For example, if you pay staff monthly and pay an annual bonus during April you can effectively divide the bonus by 12 for the purposes of calculating the hourly rate.
  1. It was previously unclear what was meant by an “employee” for the purposes of the Regulations. This final version explains that “employee” for these purposes means the same as it does in the Equality Act. That means it includes people who work under a contact “personally to do work”. Therefore the reporting obligation will include not only staff with full blown employment rights but also many self-employed workers, independent contractors etc.
  1. Although the starting point is that such individuals must be included in calculations, there is a new exemption in the Regulations such that employers are not required to count any staff working under a contract personally to do work if the employer does not have, and it is not reasonably practicable to obtain, the pay data relating to those staff. At first glance that seems to mean that, if staff work irregular hours and are not paid through payroll, with the result that it is challenging for employers to keep tabs on exactly how much they have been paid, then they have a valid reason not to include those individuals. However “not reasonably practicable” is quite a high threshold and there is a risk that the exemption could be abused by unscrupulous employers wishing to mask a high gender pay discrepancy.  Our advice is to treat this exemption with caution. If in doubt, the best approach will be to include these individuals in your calculations.
  1. The Regulations expressly exclude partners in both traditional partnerships and LLPs. Those individuals will not need to be counted towards the 250 threshold.
  1. Only “full pay” employees are included. That is to say that staff who are not receiving their full pay during the snap shot period date can be excluded from the calculations entirely. For example, staff in receipt of statutory maternity pay would not need to be brought in.  This seems a sensible change. The draft had previously required that staff on temporarily lower rates of pay (such as SMP) would have to be included, which could have given a misleading result. Note though that an equivalent adjustment has not been made for calculating the annual bonus data so that information may still end up being falsely skewed by employees on temporarily lower rates of pay.
  1. The Regulations now set out a detailed method for calculating the hourly rate of pay and for determining what is brought in to bonus calculations (including how to deal with share schemes). See Regulations 4 and 6:  http://www.legislation.gov.uk/ukdsi/2017/9780111152010
  1. Employers must publish the percentage difference in the median bonus pay figure (the previous draft had just required publication of the difference in the mean figure). This means that the requirement for publishing bonus information now mirrors that of the hourly pay data.
  1. It was unclear from the draft what precisely was meant by “quartiles” for the pay band reporting obligation. The Regulations clarify that this requires splitting the work force into four equal sized groups from the lowest paid band to the highest paid band according to the hourly pay rate. The Regulations set out a detailed method to assist with the necessary calculation (See Regulation 13: http://www.legislation.gov.uk/ukdsi/2017/9780111152010)

Please do not hesitate to contact us if you require specific advice on your gender pay reporting obligations. If you subscribe to our employment health check plan, this work will be included within the scope of your subscription.  If you do not already subscribe to the plan, please contact us for a quote. Prices start from just £85 plus VAT per month.

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