Is change on the horizon for Gender Pay Gap?
21 August 2018
The Business, Energy and Industrial Strategy Committee recently published their gender pay gap reporting.
The report makes a number of recommendations which, if accepted by the government, will see change being introduced into regulations that will build on lessons learned during the first year of gender pay gap reporting. The report focused on the obligations to businesses, but the report outcomes could equally be applied to the public and voluntary sectors.
Gender pay gap reporting requirements
All organisations with more than 250 employees are required to report on their gender pay gaps.
These reporting organisations together employ approximately 16.45 million people which represents 56% of all employee jobs in the UK. The regulations currently require qualifying organisations to provide statistics on:
- Their mean gender pay gap
- Their median gender pay gap
- Their mean bonus gender pay gap
- Their median bonus gender pay gap
- The proportion of men and women in the organisation receiving a bonus payment
- The proportion of men and women in each quartile pay band.
We are now in the second reporting year and working from snapshot dates of 31 March 2018 in the public sector and 5 April 2018 in the private and voluntary sectors.
The government has yet to respond to this report but it is not unreasonable to think that many of these recommendations will be met with favour and so with that expectation let us focus on a small number of the recommendations that would, if accepted, have the most immediate impact on us.
Widening the reporting requirements
Early consultation had previously considered the size of employer that should engage in GPG reporting and had discounted employers smaller than 250 employees for a number of reasons, not least being the administrative burden that would fall on smaller employers.
However in recognition of the growing number of software products and tools available to support employers with GPG reporting, the committee recommend that the qualifying threshold is reduced to include organisations with 50 employees.
The timescale for delivery for this recommendation recognised the need for more time to be given to smaller organisations to enable them to prepare and further recommended that the government provides the necessary support, particularly in terms of guidance, to smooth this transition.
Treatment of partner pay
The committee believe that there was one issue that should be clarified at the earliest possible opportunity and that is the way in which the remuneration of equity partners is included in the gender pay figures.
The guidance published alongside the regulations did not require the pay of equity partners in limited liability partnerships (LLPs) to be included in the calculations, as they are not employees and receive a share of the profits made.
However, the committee felt that to exclude these partners gives a misleading impression of the size of the pay gap and by omitting the highest paid people in organisations makes a nonsense of efforts to understand the scale of, and reasons behind, the gender pay gap.
The committee believe that the government was wrong to omit the remuneration of partners from the figures required in the regulations and further agree with witnesses that the initial lack of clarity was unhelpful.
As such they recommend that the government uses the guidance to clarify how data on partner pay should be calculated and included in time for the publication of data next year.
Data on ethnicity and disability
Witnesses together with research advanced the argument to the committee that “women with multiple protected characteristics tend to experience greater gender pay gaps” however, by how much can only be revealed if the relevant data is collated and published.
A more generous period of roll out, together with ample consultation has been recommended to support the committee’s suggestion that the requirement to collect and report pay gap data in respect of disability and ethnicity be introduced by 2020.
Impact of part-time working
The committee recommend that when the regulations are amended that both part-time and full-time gender pay gap statistics are required to be published. It is hoped that as a result of these additional measures, businesses would be encouraged to adapt to the growing prevalence of flexible working, more evenly shared caring responsibilities and multi-job careers and be able to demonstrate that part-time workers can expect to be fairly rewarded and also reach the top.
The committee further recommend that when the regulations are amended, the way in which bonus calculations are made is altered to reflect a pro-rata basis and that this change is accompanied with clear guidance on the method of calculation.
Increased granularity
Witnesses provided a mixed response as to the usefulness of the quartiles however the committee agreed that additional granularity in the figures would be helpful and would not require significant additional work to produce and so have recommended that when the regulations are amended, the requirement for information on salary quartiles is changed to deciles.
The role of Equality and Human Rights Commission (EHRA)
The EHRC reported that all employers, believed to be in scope of the regulations, have published their gender pay gap figures.
The committee believes that to prove full compliance has been achieved each year it is important that all qualifying organisations are known. Now an initial list has been established, the committee has recommended that the government publishes and maintains a definitive list of all organisations that fall within the scope of the gender pay gap regulations.
The government was also criticised for failing to provide legal certainty as to the available enforcement mechanisms and sanctions for breaches of the regulations. It has been recommended that the government, at the next available opportunity, ends the legal uncertainty surrounding the ECHR’s enforcement powers by providing for specified fines for non-compliance.
This article was originally written for Accounting WEB (21 August 2018)