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Gender Pay Gap

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On 6 December, after a long wait, the Government published the revised (and final) version of the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.

The revised Regulations, which are due to come into effect in April 2017, provide much needed clarity, as well as amending certain aspects of the previous draft Regulations which caused particular concern (for our article on those Regulations click here http://www.twmsolicitors.com/news-and-blogs/gender-pay-reporting-obligations/

What is required? 

To recap, the Regulations require ‘relevant employers’ (see below) to publish the following:

  • the difference between the median and mean average hourly rate of pay paid to male and female employees;
  • the difference between the median and mean average bonus paid to male and female employees;
  • the proportions of male and of female employees who receive bonuses; and
  • the relative proportions of male and female employees in each quartile pay band of the workforce.

The figures should be published on the employer’s website within 12 months of 5 April. Employers will therefore be required to publish their first gender pay gap reports by 4 April 2018. The figures should be accompanied by a written statement of accuracy, signed by a director or partner, and should remain on the website for at least 3 years.

Relevant employer

The Regulations will apply to those non-public sector organisations who have 250 or more employees on 5 April each year. As currently drafted, group companies will not be required to aggregate employees across different subsidiaries. It is therefore possible that a large group of companies could be outside the scope of the requirements if it does not have any single entity that employs 250 or more employees. Conversely, very large corporate groups may find that they have to produce several reports, one for each separate entity that employs 250 or more employees.

Relevant employee

The revised Regulations state that those employed on 5 April each year will be deemed a ‘relevant employee’ for the purpose of reporting. The Explanatory Notes to the revised Regulations confirm a broad definition of ‘employed’ to include not only those working under a contract of employment, but also those working under a contract of apprenticeship or a contract to personally do work. This covers many self-employed workers who are engaged directly by employers as consultants, independent contractors etc. as at 5 April.

However, the Government has provided for an exception when the employer does not have, and it is not reasonably practicable for the employer to obtain, the relevant data in relation to a particular worker, for example those who do not work fixed hours and are not paid through the payroll. However these ‘employees’ will still count towards the 250-employee threshold, even if the exception applies. There is clearly scope for argument about when it will be “reasonably practicable” to obtain the relevant data.

It has also been confirmed that partners are expressly excluded from the reporting requirements.

Employers are required to consider only those who are on full pay on the 5 April each year for the purposes of calculating the difference between the median and mean average hourly rate of pay, and the proportion of male and female employees in each quartile. This is in response to concerns that those employees on a reduced rate, because they are on maternity leave for example, could skew the data. However, employees on reduced pay will still be considered for the purpose of reporting on bonuses.

Pay

Employers should consider an employee’s average gross hourly rate of pay over the relevant pay period. ‘Relevant pay period’ has been defined as the pay period during which 5 April falls. It will therefore differ depending on whether employees are paid weekly, monthly or otherwise. When calculating the employee’s hourly rate of pay, the revised Regulations have confirmed that bonuses should be taken into account, but only the portion of the bonus proportionate to the relevant pay period. This avoids the situation in which an annual bonus paid in April, for example, skews the data.

The Regulations have also clarified that employers should take a 12 week reference period when considering those employees whose working hours (and therefore pay) vary week to week.

Quartile bands

The definition of ‘quartile pay bands’ has been clarified. It was unclear from the original draft Regulations whether the Government intended employers to split their pay range into four bands of equal breadth and divide employees amongst the bands based on their individual rates of pay, or to put employees in order of their pay, from lowest to highest, then divide the employees into four equal groups. The revised Regulations have confirmed that the latter interpretation is correct.

Bonuses

It has been confirmed that bonuses to be considered for the purpose of reporting include any bonuses which have been paid in the 12 month period ending on the 5 April i.e. for the first report, employers should look at any bonuses paid between 6 April 2016 and 5 April 2017. The definition of bonus does not include any paid overtime.

What happens if employers fail to publish?

The Explanatory Notes to the draft Regulations indicate that failure to comply with the Regulations will constitute an ‘unlawful act’, which empowers the Equality and Human Rights Commission to take ‘enforcement action’. However, the Regulations currently contain no provision for enforcement.

What next?

Acas is expected to publish guidance which expands on the core Regulations in due course.

For further details about our expertise in this area, please Click Here

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