The Government has at last published the final version of the Gender Pay Gap Regulations (“the regulations”), along with explanatory notes. These regulations are subject to Parliamentary approval and are due to come into force on 6th April 2017.
We previously published a detailed note on the draft regulations. Many issues and concerns raised during the consultation have been addressed in the final regulations. There are some welcome changes and more detail provided, for instance on how to calculate pay, although some areas of uncertainty remain.
What is new and what are the key considerations?
• The reporting obligation will apply to all businesses which have over 250 employees. In the draft regulations this was restricted to employees in the UK subject to UK laws. However, the specific reference to UK employees has been omitted in the latest regulations leading to speculation amongst commentators that employers who do not have 250 employees in the UK but do have 250 employees internationally could be obliged to report. It is not clear whether this omission was intentional and intended to amend the interpretation of the regulations. If it was, the regulations could apply to employers with a large number of international employees who previously would not have been caught.
• The duty to report will apply to employees only. The explanatory notes confirm that the definition of employee is that contained in section 83 of the Equality Act 2010 and therefore workers will also be included. However, partners and LLP members are excluded.
• Those who are employed “under a contract personally to do work” ie contractors are excluded from the requirement to report on pay data if it is not reasonably practicable for employers to obtain such data. This is intended to address the difficulties that employers face when obtaining the necessary data from those engaged on a casual or consultancy basis.
• The date for the ‘snapshot’ of information which must be considered has moved to align with the tax year to 5 April in any given year;
• There is the introduction of the new definition of “full–pay relevant employee”. This removes the requirement to include those who do not receive full pay from the hourly pay comparison and therefore avoids potentially skewed figures due to the inclusion of those on maternity or sick leave. However, this therefore excludes those employees from the reporting duty entirely, whereas it may have been preferable and have provided more accurate data to include them but use their substantive salary.
• Further detail has been included on how to calculate pay. Gross hourly pay is to be calculated using an employee’s normal working hours (where applicable) or by adopting a 12 week reference period for those whose working hours vary from week to week.
• Clarification has also been given on how the quartile pay bands are to be calculated. Equal numbers of employees should be within each quartile. The quartiles are now described as lower, lower middle, upper middle and upper quartile pay bands.
• A clearer definition of what constitutes bonus pay has been provided, along with an exhaustive description of ordinary pay. Ordinary pay includes basic pay, allowances (but not expenses), piecework pay, leave pay and shift premium.
• There is a requirement to publish the difference in both the mean and median bonus figures for both men and women (previously this was just mean bonus). For businesses who pay annual bonuses in respect of the whole year, Regulation 6 now confirms that the bonus amount can be calculated pro rata to the relevant pay period. So, for an annual bonus only 1/12th would need to be included.
• Reporting on the bonus pay is to the end of the tax year prior to the snapshot date. So for the first year it will be any bonus paid in the year from 6 April 2016 to 5 April 2017. This applies to all relevant employees, not just full-pay relevant employees so employees on maternity or sick leave should be included;
• Enforcement is still relatively toothless, although the Equality and Human Rights Commission can use its existing enforcement powers under the Equality Act 2010, this power is rarely exercised. For now, at least the threat of negative publicity and how unions and employees will seek to exploit the gender pay gap data are likely to be the main concerns for employers.
The first reports are due to be published by 4 April 2018. Employers should begin collating information and calculate the gender pay gap on the snapshot date of 5 April 2017. It is important to put a plan into place now and ensure that that is implemented. If you require any further assistance or help in calculating your gender pay gap please get in touch with your usual DWF contact.