By Patrick Stewart
The Government have published draft regulations which will require large employers to publish details of the gap between male and female employee rates of pay. This gives delayed effect to section 78 of the Equality Act 2010 and whilst it is envisaged that the rules will take effect from 1 October 2016, there will be indirect effect from 1 May 2016. Employers subject to the regulations need to prepare now.
1. Who is affected?
The Regulations only apply to employers with more then 250 employees. Employers includes companies, partnerships and individuals.
Employees are those who ordinarily work in the UK and whose employment is governed by UK Law.
There is excluded from the definition of such employees:
- Workers who are not employees
- Self-employed contractors
- LLP members.
Note that there is no aggregation of employees working for associated companies within a group. Therefore if company A and company B are associated companies and each have 200 employees, neither is caught by the regulation. However, if company A has 300 employees and company B 100, company A is subject to the regulations and company B is not. In such circumstances, company A may wish to consider transferring 100 employees to company B, and that way both companies escape the regulation.
2. What has to be reported?
If an employer is subject to the regulations, then there are five areas of information which needs to be published:
A. The difference in mean pay, that is a comparison of the average hourly rate paid to all male employees in the organisation against the average hourly rate paid to all female employees within the organisation.
The Employer will have to assess the average pay for all male employees, calculated as an hourly rate, and then the same for all female employees. The information to be published is the difference between the two expressed as a percentage.
B. The difference in median pay. This involves the hourly rate at the mid point for all male employees as against the mid point for all female employees. The Employer will have to assess the various rates of pay for all employees, calculated on an hourly basis and then find the rate halfway between the highest and the lowest. Repeat the process for all female employees and compare the result. Again this is the difference between the two expressed as a percentage that needs to be published.
C. Bonuses – The difference in average bonuses paid by the employer to male and female employees. The bonuses include profit share arrangements, productivity bonuses, commissions, long term incentive plans and the cash value of shares.
Employers will have to ascertain total of all bonuses paid to male employees in the relevant year and in monetary value. Then divide by the number of male employees receiving bonuses in that year. This gives the average. Repeat for female employees and compare the results. As before, it is the difference in the average that is to be published.
D. Bonuses again, the proportion of male and the proportion of female employees who receive bonuses.
E. Of the total male employees how many receive bonuses as against the same for female employees. It is the difference between the two which is published and expressed as a percentage.
F. Pay difference in quartiles. The employer will need to calculate the hourly pay rates of the organisation as a whole expressed as quartiles i.e. the lowest quarter, the second quarter, the third quarter and the fourth quarter. The employer then needs to calculate how many male and how many female employees fall within each quartile and it is the difference between those numbers in each quartile expressed as a percentage which needs to be published.
3. When to calculate?
For items A, B and E above it is calculated by reference to the pay rates in April of each year. For C and D, the bonuses – it is for the year to 30 April in each year.
The first April for consideration is that in 2017 so for bonuses, the year will commence on 1 May 2016.
4. What is pay?
For the purposes of these regulations and the calculation of pay, there is included:
- Basic pay
- Paid leave
- Maternity pay
- Sick pay
- Shift premiums and allowances.
There is excluded from the calculation:
- Benefits in kind
- Salary sacrifice
5. What is to be published and when?
The obligation on the employer is to publish the information referred to in A - E of Part 2 above on a website that is accessible to the public and to the employees. It is also a requirement that the information is uploaded on to a Government website. The Government has indicated that they will collate such information and publish league tables of “best” and “worst” employers by reference to gender gap pay and also collated by sectors.
Employers have to publish the information within one year. Therefore for the pay gap calculation undertaken in April of 2017, this must be published by 30 April 2018 at the latest. It is open to an employer to publish earlier than this. The information must remain on the website for three years.
6. What to do?
Employers should establish whether they will be subject to the regulations. If they are, speak to payroll providers to discover whether the information required will be readily available. If not, consider software adaptions to allow for this. It may be worthwhile running a dummy exercise to assess what the gender pay gap is at present then compare the figures with other organisations within the relevant sector and plan how to progress any issues which this information comparison reveals.
In readiness for publication of the information, prepare a message which accompanies such publication. The message will, of course, depend on what level of gap is revealed. It could be either, self-congratulatory if the gap is low to non-existent, or, make reference to plans to address the issues if the gap is significant.
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