Despite making progress in closing the gender pay gap in recent years the Government acknowledges much more needs to be done if it is to end the gender pay gap “in a generation.”
The Government is therefore consulting on draft regulations on gender pay reporting for large private and voluntary sector employers. The intention behind the draft regulations is to increase transparency in business therefore prompting employers to review their gender pay gap, understand the reasons behind any gap and to act where inequality is apparent.
What is a ‘gender pay gap’?
Rather than signifying unequal pay, a ‘gender pay gap’ shows the difference between the average earnings of men and women as a percentage of men’s earnings.
According to the latest figures published by the Office for National Statistics, the overall UK gender pay gap for all employees (full-time and part-time) is 19.1%. This shows that a woman, on average, earns around 81p for every £1 earned by a man.
On 8 February 2016 Nicky Morgan MP speaking at Deloitte gave the following statistic:
“With over £40 billion paid in bonuses in the UK in 2014-15 and a gender bonus gap of 57%...”
As alarming as the above statistic may be on first glance, the gender pay gap is not simply an issue of gender inequality or discrimination. It is a complex issue caused by a number of interrelated factors, including (but not limited to) occupational segregation; undervaluing of women's skills; fewer women in senior positions; and balancing work and family responsibilities. It is difficult to quantify the impact of women’s personal choices.
Tackling the issue
The Equality Act (Gender Pay Gap Information) Regulations 2016 (the “Regulations”)
The draft Regulations will introduce mandatory gender pay gap reporting to large private and voluntary sector employers in England, Wales and Scotland with at least 250 employees (employees being those who ordinarily work in Great Britain and whose contract is governed by UK legislation).
Employers within scope will be required to publish:
the difference in mean and median pay between their male and female employees;
the difference in mean bonus pay between their male and female employees;
the proportion of their male and female employees who received bonus pay; and
the number of male and female employees in each quartile of their pay distribution.
A written statement signed by the ‘appropriate person’ (depending on the legal status of the company) confirming that the information is accurate must accompany the required information.
The report must be published in English on the employer's UK website every year, in a manner accessible to all employees and the public, and left there for at least three years. The employer must also upload the information to a government-sponsored website.
The Regulations will require employers to publish the above information within 12 months beginning 30 April 2017 and each subsequent anniversary.
The Government's initial intent is for employers who do not comply to be 'named and shamed’ however, the Government will be monitoring levels of compliance closely during the initial years of implementation and additional civil penalties for non-compliance may be considered.
Subject to the approval of Parliament, the regulations will come into force on 1 October 2016. However, as mentioned above, employers will have approximately 18 months after commencement to publish the required information for the first time (April 2018).
The draft Regulations are open for consultation until 11 March 2016.
A step in the right direction?
The Government believe that greater transparency will “cast a light on the challenges of progressing in the workplace and create the pressure we need to drive change,” with the hope of improving discussions and actions towards addressing any significant issues.
The Trades Union Congress’ (“TUC”) General Secretary, Frances O’Grady, accepts the draft Regulations is a step in the right direction, however, is of the view that “a much bolder approach” is required if the Government is serious about ending the gender pay gap. The TUC estimates that if the gender pay gap continues to fall at its current rate of 0.2 percentage points a year, it will take 47 years to achieve pay parity between men and women.
The TUC’s 'bolder approach' would include tougher sanctions for non-compliance, extending the scope of the Regulations to medium-size employers and publishing the reports earlier than April 2018.
Next steps for employers
Collating the information is likely to be a time-consuming task, in particular for those employers with thousands of employees. It is recommended that employers start preparing for the requirements before the obligations come into effect.