New Regulations, which come into effect in October 2016 provide that large employers will need to publish information on wage and bonus differences between men and women. The Regulations have now been published in draft and the government has released guidance on how the new gender pay reporting regime will work.
The differences between male and female pay are not shown in actual amounts, but rather as percentages (therefore actual pay amounts do not need to go into the public domain).
Are you caught?
Yes, if on 30th April 2017 you employ 250 or more employees who work in Great Britain and whose contract of employment is governed by UK legislation. At the moment it appears that each company within a group will be viewed separately in calculating the total number of employees.
What needs to be published
You need to publish:
(i) the difference in mean pay between all male and all female employees?
(ii) the difference in median pay between all male and all female employees?
(iii) the difference in mean bonus pay (over the previous 12 months) between all male and all female employees receiving a bonus;
(iv) the proportion of male and female employees who received bonus pay (over the previous 12 months); and
(v) the number of male and female employees employed in quartile pay bands A, B, C and D.
We have shown below how these are to be calculated.
What is ‘pay’ and ‘bonus’?
Pay:
- includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances).
It does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.
Pay is to be calculated before deductions for PAYE, national insurance, pension schemes, student loan repayments and voluntary deductions. It is to be calculated on an hourly basis (which could prove particularly challenging).
Bonus: includes payments received and earned in relation to profit sharing, productivity, performance and other bonus or incentive pay, piecework and commission, long term incentive plans or schemes (including those dependent on company and personal performance), and the cash equivalent value of shares on the date of payment.
When to publish
The first publication will be by 30th April 2018, and annually thereafter. Accordingly, you will need to take a data snapshot on 30th April 2017.
Where to publish
A statement confirming the accuracy of the data published must be signed by a director. The data and statement must be published on your website in the UK and retained on it for 3 years.
How to do the calculations
(i) mean pay between male and female employees
Mean pay is the total amount of pay divided by the number of employees. This needs to be done in two sections, male mean pay and female mean pay, and then the difference between the two shown as a percentage:
(male mean pay – female mean pay) x 100
male mean pay
(ii) median pay between male and female employees
Median pay is the middle amount of pay in a list where all the pay sums are listed from lowest to highest. The difference between the two is again expressed as a percentage:
(male median pay – female median pay) x 100
male median pay
(iii) mean bonus pay (over the previous 12 months) between all male and all female employees receiving a bonus
Mean bonus pay is the total amount of bonus pay divided by the number of employees receiving a bonus. This needs to be done in two sections, male mean bonus pay and female mean bonus pay, and then the difference between the two shown as a percentage:
(male mean bonus pay – female mean bonus pay) x 100
male mean bonus pay
(iv) the proportion of male and female employees who received bonus pay
At last quite a simple one:
number of men receiving a bonus x 100
total number of men and women receiving a bonus
number of women receiving a bonus x 100
total number of men and women receiving a bonus
(v) the number of male and female employees employed in quartile pay bands A, B, C and D
It appears (the Regulations are not absolutely clear) that you need to take your overall pay range (for male and female) and then divide it into for quarters (A, B, C and D).
You then need to detail the number of both male employees in each of A, B, C and D, and female employees in each of A, B, C and D.
What if you fail to comply?
There are currently no sanctions (civil or criminal) in place should an employer fail to adhere to the Regulations. Additionally, no mechanism is in place for the content of a report to be validated by the government. However, it is possible that sanctions will be introduced in the future. In saying this, there are currently in place mechanisms for Tribunals to order equal pay audits. Also, even at a basic level, a disgruntled employee may ask the Tribunal to draw inferences of discrimination based upon a company’s lack of transparency/compliance with the regulations.
In the meantime, employers should be mindful of failing to produce an accurate report. In the event that an employee should discover an inaccurate report and blow the whistle, they would likely be making a protected disclosure which would be in the public interest.
Employers should also beware the possibility of being named and shamed by the government which has stated that it will publish league tables. Being at the lower end of the league table could cause significant embarrassment and affect the company’s ability to attract and retain high calibre candidates.
Finally, a lack of transparency may be off putting for those you are seeking to recruit – in effect, a choice not to disclose may be indicative that the company is concerned about its inequality in pay.
Summary and Action Points
The data to be published will not show the actual sums but rather any differences, in percentage terms, between the earnings of men and women.
Whilst it is not currently a requirement to include any commentary with the figures, employers may well want to do this if, for example, the results do not give a clear picture, or if the business is taking action to combat a pay gap that it wants to highlight.
The first snapshot of data will need to be taken on 30th April 2017, so it will be necessary to ensure that your HR/payroll systems can extract the data at this date. For some employers the process will be easy, but for others it will be more complicated, especially where pay and bonus can be comprised of a number of elements and where hourly pay is not that easy to work out.
Employers may want to consider a “trial run” on 30th April 2016 to see how the data might look and give enough time to address any concerns.
The Regulations are still in draft form and subject to consultation, but it seems sensible to prepare on the basis that the proposed provisions will apply.
Please contact David Israel, disrael@wedlakebell.com if you have any questions or would like assistance with preparing for the new reporting regime.