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Mandatory Gender Pay Gap reporting – a summary

26th April 2016

Transparency for gender pay

Gender pay gap reporting is due to come into force this October in which all employers who have 250 or more relevant employees will need to comply with the new law. Mandatory reporting is expected at the latest by April 2017, with the draft law providing that employers will need to collate data by 30 April 2017 and commence reporting information by 30 April 2018.

Who will be affected?

Employers with 250 or more relevant employees will fall within the scope of the new law. This means a wide range of employers will be affected, including companies, limited liability partnerships, partnerships, unincorporated bodies and any other types of employing entity.

The new law will not affect public sector employers or any private employer with less than 250 relevant employees. This will be the case even where the employer is part of a large group of companies together employing 250 or more relevant employees if no separate entity employs 250 or more employees.

What will Employers need to disclose and where?

The draft law provides that affected employers will need to disclose:

  • overall mean and median gender pay gap figures, calculated using average hourly pay;
  • the mean bonus pay gap over the 12 months, and the proportion of male and females who receive the bonus at this time; and
  • the number of men and women in each quartile of the employer’s pay distribution.

This information will need to be published on the employer’s website (which must be accessible to both employees and to other interested parties), be authorised by a director or another appropriate member of the company, and remain accessible for a period of at least three years.

Who is a ‘relevant employee’?

It is currently defined as someone who works ordinarily in the United Kingdom and their contract is governed by UK legislation. This indicates that workers who do not work under a contract of employment are excluded – this will be likely to be clarified when the new law is finalised.

How do they calculate the gender pay gap?

It is a percentage calculated by dividing the difference between the average pay of pay of male employees and average pay of female employees by the average pay of all male employees. A negative pay gap means that the average pay of men is lower than the average pay for women. This is reflected in the diagram below, where M is average male pay and F is average female pay.

-------- x 100

Pay is inclusive of the following:

  • basic pay;
  • paid leave;
  • maternity pay;
  • sick pay;
  • area allowance;
  • shift premium pay;
  • bonus pay; and
  • certain other types of pay

Pay is calculated gross before deductions for PAYE, national insurance, pension schemes, student loan repayments and any other voluntary deductions.

What are the ramifications of not complying?

Currently there are no formal sanctions been put into place, but it is anticipated that the government will ‘name and shame’ those companies who do not comply through publication of “best” and “worst” league tables, potentially on a sector by sector basis. This will be likely to affect the employer’s reputation and could result in a poor stigma being attached to the employer, and the employer may become the target of pressure groups, trade unions or claimant friendly organisations with dedicated equal pay units. In order to avoid these negative repercussions employer are advice to adhere to these regulations.

What steps could you take in preparation for the change?

It’s important to remember that it is better to start sooner rather than later, keeping in mind that any bonus payments made from this May (2016) could potentially be caught in the gender pay reporting. Trying to get a good overview of where your company is currently at will allow for a smoother transition and increased compliance for when it comes into force later this year. With this in mind, it is advisable to take the following initial steps:

  1. Gather information
  2. Determine which jobs are equal
  3. Identify pay gaps
  4. Determine cause of pay gaps
  5. Develop an equal pay action plan

This advice will be updated accordingly as further information is provided by the government and once the draft law comes into force.

Article provided by Oliver Morgan, Solicitor in the Corporate & Commercial team at Mundays.

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