The Gender Pay Gap: Mandatory Reporting Announced

The UK government introduces mandatory reporting for businesses to account for average male and female earnings.

According to the UK’s Office for National Statistics, on average, women earn around 80 pence for every £1 earned by a man.

On 14 July, the UK government committed to introducing regulations that require private and voluntary sector businesses with at least 250 employees to publish details of their gender pay gap (i.e., the difference in pay between male and female employees). The Government Equalities Office launched a consultation that seeks employers’ and others’ views about the details of these reporting requirements. It appears that this requirement will apply to all employers regardless of where they are registered (in the UK or otherwise), as long as such employers employ at least 250 employees in the UK. However, depending on the comments received during the consultation, the government may decide  that the regulations apply only to UK employers.

Background

The ongoing discrepancy in pay between men and women was previously tackled by the Labour Party in 2010, when, in revising discrimination laws, it introduced the “option” of putting forth rules that would require private employers with at least 250 employees to publish information to show the differences in pay (if any) between male and female employees within their organisations. The option, however, was not taken up under the coalition government in 2010, and instead, gender pay reporting was introduced on a voluntary basis under the Think, Act, Report initiative. Although 250 companies signed up for the initiative, a report in August 2014 showed that only four companies had published their gender gap information through the program, indicating that the voluntary nature of the scheme may have undermined its effectiveness.

The coalition government attempted to resolve the gender pay gap issue by introducing a sanction (effective 1 October 2014) that employment tribunals can impose to require any company that has been found guilty of an equal pay breach to carry out an equal pay audit and to make the results public.

The government has now shown a greater commitment to eliminate the gender pay gap by proposing that all large companies be required to publish details on the average pay of men and women employees.

Proposals

The consultation, which will close on 6 September 2015, seeks comment on a number of details, including the following:

• Whether respondents agree that mandatory reporting will help close the pay gap.
• Where the gender pay information should be published (e.g., on employers’ websites). At the moment, the government does not appear to suggest that such information should be included in annual reports.
• The content of the information that should be reported (e.g., an overall pay gap figure, separate gender pay gap figures for full-time and part-time employees, or average earnings for men and women—depending on grade or job type). There is a concern that publishing figures may not accurately reflect whether employees are receiving equal pay for equal work, and employers may also wish to produce additional narrative information.
• The frequency of reporting (which should be no less than every 12 months).
• When the regulations should be applicable for different-sized organisations. A phased introduction has been suggested, with employers with 500 or more employees being required to publish information earlier than those with 250 employees.
• Whether civil enforcement procedures are required to ensure compliance with the proposed regulations, and if so, what form these should take. It is likely that the Equality and Human Rights Commission will monitor compliance of the regulations, with fines unlikely to exceed £5,000.

The new regulations are expected to take effect by March 2016, with the first reports unlikely to be published until 2017. Although the financial penalty for not complying with the reporting requirements may not be too burdensome for companies, the real incentive to comply with the new rules (and to produce data that do not show an enormous gender pay gap) will come from the risk of adverse publicity and reputational damage.

Practical Steps

Employers may wish to take the following steps before the mandatory reporting requirements take effect:

• Review all current pay practices and rates to identify and understand any differentials that may exist between men and women
• Consider gender pay gaps that exist on a departmental, geographical, or functional level and compare these with the composition of the workforce
• Consider whether changes should be made to information technology systems and administrative processes to improve gender pay reporting capabilities