Mandatory gender pay reporting
Equal pay and the gender pay gap have been in the media spotlight for some time with the public sector subject to mass litigation over the past…
Equal pay and the gender pay gap have been in the media spotlight for some time now. It is no secret that public sector organisations have been subject to mass equal pay litigation over the past decade following their implementation of ‘single status’ (a national agreement which re-organised pay and grading in local government). However, now the focus seems to be progressively shifting towards addressing the gender pay gap in the private sector.
In an effort to address the issue, the Equality Act 2010 (Equal Pay Audits) Regulations came into force in October 2014 which requires Employment Tribunals to order employers who lose equal pay claims to undertake an equal pay audit. However, in equal pay litigation, it is often the case that claims are settled before a finding is made. The threat of an equal pay audit being ordered is likely to further encourage this approach.
Those regulations have now been followed up with a much bolder move, whereby the government has backed the push for further reforms with a commitment to introduce mandatory gender pay reporting in 2016. This would require companies with 250 or more employees to carry out an equal pay review and publish their gender pay gap. Crucially, it is anticipated that the new Regulations will apply to the private and voluntary sectors only and that public sector organisations will be exempt.
Consultation on the proposals has now been launched to discuss the precise measures and details of what will be required. The consultation paper suggests that implementation will be delayed (to give employers opportunity to prepare) and possibly phased by company size, thereby giving additional preparation time to smaller employers. In terms of the detail required, initial commentary suggests that employers could be required to go beyond simply reporting the overall pay gap, and instead publish the difference between male and female starting salaries, the difference between average basic pay and total average earnings of men and women broken down by grade and job type, as well as other components such as bonuses.
As well as the level of data required, other details to be discussed in the consultation include:
- Where information will be published;
- How frequently it should be published;
- To what extent employers can contextualise the results with supplementary narrative and remedial plans;
- The systems required to collect the data (and what they will cost); and
- What support needs to be put in place to help employers with implementation.
What are the potential implications for employers?
Naturally, some of you may have concerns that mandatory publication of gender pay information will burden you with costly and complex reporting. In addition, you may well be unaware that you even have a gender pay gap until your organisation analyses its pay information. If the results are positive, publication of a gender pay gap could increase employee confidence in the remuneration process and enhance your corporate reputation. However, if inequalities are highlighted, this could have a number of significant and harmful implications for companies including negative publicity, reputational damage and the costs associated with claims for equal pay going back up to six years. An issue for employers therefore is that you may be forced to open a can of worms that you would rather keep closed, especially in light of publicity regarding equal pay litigation in the public sector and no-win no-fee solicitors now looking to target private sector organisations.
In terms of non-compliance, there is a proposed fine of up to £5,000. To some organisations, this is not a significant amount of money, however, the associated negative publicity and reputational damage could be far more costly. Where equal pay claims arise, a Tribunal may be influenced by the fact that a pay audit has not been carried out. In addition, non-compliance with reporting measures, or negative outcomes, could also affect chances when tendering for work.
That said, by being proactive, you may have an opportunity to substantially improve your position and mitigate any legal and commercial risks. Carrying out an equal pay review now would help your organisation to identify any gender pay gaps, consider whether any material defences apply, set out explanations/evidence for differences and figure out how to address high risk areas going forwards. When doing this, expert legal advice in this specialist area is essential.
The consultation paper can be viewed at: https://www.gov.uk/government/consultations/closing-the-gender-pay-gap
Weightmans will be engaging with the consultation and will be submitting a response to the paper. You should shortly receive a link to our online survey which will set out the key questions being asked by the Government.
Please do take the opportunity to share your views on the details of the requirements, the anticipated costs, and what practical effects you think a mandatory reporting regime will have on your organisation.