Yes, you’re right, there are more than five tricky issues in gender pay gap reporting; but here are a few of our top picks. From Kathleen Morrison – Professional Support Lawyer in the employment team at Brodies LLP.
Group companies: who produces the report?
Each company in a group must produce a separate report (if it has 250+ employees), and groups don’t need to aggregate employees across different subsidiaries. As this could skew the gap for some companies, the government has indicated that its (much anticipated) guidance will encourage voluntary disclosure of gaps across wider groups if senior leaders, board members and shareholders think this would be ‘informative and appropriate’.
Who counts as our employees?
Even although this could make a significant difference to your gender pay gap; it isn’t straightforward. Here are a few things to look out for: Whether you include self-employed contractors, consultants and casual workers will depend on their contract and what is happening in practice; The position is unclear on overseas workers; Although (sensibly) workers on sick or family leave are excluded from the hourly pay gap calculations (if their leave means they’re not on full pay), remember to include them in deciding if you meet the 250+ threshold, and in your bonus gap calculations.
Do we include paid / unpaid overtime hours?
When calculating hourly pay, don’t include hours for which an employee is entitled to overtime pay. But what about employees with set contractual hours who regularly work unpaid overtime? Do you use their contractual hours, or the hours they actually work. Clearly, using the higher number of hours will produce a lower hourly rate. This could be favourable to your gender pay gap if a high proportion of well-paid male staff fall into this bracket. That said, administratively, it will no doubt be easier to use basic contractual hours. The forthcoming government guidance might straighten this out.
Do we pro-rate bonuses?
When calculating hourly rates: Include a pro-rated amount of any bonus (eg. commission, performance bonus, annual bonus) paid in the pay period (eg. week / month depending how often the employee is paid) including 5 April. Don’t include bonuses paid at any other time of the year. If this inflates your hourly pay gap, think about amending your bonus scheme structure or payment date, or explaining this in your narrative. On the other hand, when calculating your bonus gap, include: All bonuses paid at any time in the 12 months ending 5 April; The whole amount paid in that 12-month period, even if part relates to performance in other years; The actual payment – so, eg. use the actual figure paid to part-time staff who received a bonus pro-rated in terms of their working hours, not a notional full-time figure. If this distorts your bonus gap because you have a high proportion of female part-time employees, consider explaining this in your narrative.
What should we say in our narrative?
If your gender pay gap is not ideal, your report may well attract negative publicity and generate disquiet amongst your workforce. Although a narrative is voluntary, a carefully drafted one could curb some of the criticism. There may be reasons that explain at least part of your pay gap. There may, for example, be distortions in your: Hourly rate gap, due to the timing of bonus payments; historic pay discrepancies; or shift premiums. Bonus gap, due to pro-rating for employees on maternity leave, or high proportions of female part-time staff receiving pro-rated annual bonus. In some cases, there may be merit in discussing what you are doing, or planning to do, about your pay gap. In all cases, consider any narrative carefully, and tailor it to your organisation. What is it appropriate to discuss? What commitments, if any, do you want to make? In terms of the level of detail, bear in mind data protection and confidentiality.
