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Gender pay gap reporting – Comments on the final draft of the regulations

13/12/2016

We have recently seen the publication of the final draft of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, together with Explanatory Notes. Nick Rowe, Employment Law specialist at Lodders, explains these new regulations and how they may affect you.

There have been a number of important changes:

A “relevant employee” is now “a person who is employed by the employer on the relevant snapshot date” which removes previous references to ordinarily working in the UK or under a contract governed by UK law. It has also been confirmed that the wider definition of “employed” under section 83 of the Equality Act 2010 applies which covers employees, workers and the self-employed under a contract to do work personally.

Only “full paid relevant employees” are included in the calculation, which does not apply to those whose pay is reduced due to leave such as maternity leave or sick leave. This is to address concern about making the gap appear greater should the workplace have a significant number of staff on statutory or unpaid maternity leave on the snapshot date.

The snapshot date has been changed from the 30th April to 5th April in order to align this with the tax year and thus make the collection of information by employers more simple.

The definition of pay is now fully defined to include:

  • Basic pay;
  • Allowances (but not out of pocket expenses);
  • Pay for piecework;
  • Pay for fully paid leave;
  • Shift premium pay.

The definition of bonus pay has also been clarified, as “any remuneration that is in the form of money, vouchers, securities, securities options, or interests in securities, and relates to profit sharing, productivity, performance, incentive or commission”. It does not include overtime pay or any pay related to termination, including redundancy pay. As the snapshot period for bonuses is 12 months, this will include all relevant employees and not exclude those who aren’t “fully paid” by reason of leave even if their bonus is reduced as a result.

A detailed method with a 12 week reference period has also been included to cover casual workers without regular hours which could affect the reporting.

The names of the quartiles have been amended to lower, lower middle, upper middle and upper. It has been clarified that an equal number of employees must be in each quartile.

Enforcement has also been clarified with the Explanatory Notes stating that non-compliance with the regulations would constitute an unlawful act under section 34 of the Equality Act and the ECHR will be able to take action accordingly. The ECHR has expressed concerns that its current powers may not be suitable for enforcement and it may be that a “name and shame” approach will also be adopted alongside this although no details have been provided.

In summary, employers will have to publish the following:

  • Median and mean gender pay gap figure for pay, based on the hourly pay of “full pay relevant employees” during the relevant pay period. This will include a pro rata proportion of any bonuses paid during the relevant pay period.
  • Both the median and mean gender pay gap figure for bonuses paid in the year ending with the snapshot date. The previous draft regulations only referred to the mean figure but there was concern that a few very high earning senior executives could skew the mean figure.
  • The percentage of men and the percentage of women who received a bonus.
  • The number of men and the number of women in each pay quartile.

This must be supported by a written statement of accuracy signed by a partner, director or equivalent and must be published for 3 years in a manner accessible to the public. The data will also be kept on a central website set up by the Government.

The final draft adds welcome clarity on a number of points, although there is still concern that the regulations lack teeth as far as enforcement is concerned. Further clarity will be provided by supporting non-statutory guidance which is to be published after parliamentary approval of the regulations and ACAS has also indicated that it will be producing guidance in early 2017.

Lodders’ team of employment solicitors always offer accurate, focused and solution-based legal advice to a wide range of clients. We have forged an excellent reputation for advising individuals, companies, charities and other bodies in respect of all manner of employment related issues. For help or advice please contact Nick Rowe on 01242 229 096 or drop him an email.

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For help or advice surrounding this article or other employment related issues, please contact Nick Rowe on 01242 229 096 or by email.