It is expected that some significant changes will be made to the draft gender pay regulations which were published in February 2016.
More employers are likely to be brought within the scope of these reporting rules. This information has come to light from a recent consultation document on gender pay reporting for public sector employers. The government has made it clear that the reporting obligations for private and voluntary sector employers will be the same as those for public sector employers.
Mandatory gender pay gap reporting is not the only step being taken regarding diversity in the public sector. The civil service recently carried out a one-month pilot to review the racial and socio-economic backgrounds of the most senior staff in government. The intention is to issue guidance to businesses and the rest of the public sector later this year, on how to “measure” the class background of their recruits. In this update, we look at what the final version of the gender pay reporting rules is likely to say and what this means for employers.
What changes are expected to be made to the gender pay rules? The following information is not in the current draft reporting rules but is in the consultation document referred to above, and is likely to be in the final gender pay regulations for private and voluntary sector employers:
A wider definition of employees: The threshold for the reporting requirements is employers in the UK with at least 250 “relevant employees” who ordinarily work in Great Britain, or have a sufficiently strong connection with Great Britain. Each legal entity must report separately on their employees.
It seems that a broad definition of employee will now be used, covering individuals who are employed under:
- a contract of employment
- a contract of apprenticeship, and
- a contract personally to do work
If so, all employees and workers will come within the scope of the rules, as well as potentially some self-employed contractors and consultants, salaried partners and those LLP members who are recognised in law as workers (which is likely to include many or possibly all members of a typical professional services’ LLP). If this wider definition is adopted, more employers will meet the 250 employees threshold and be brought within the scope of the rules.
It may also be harder for employers to provide the gender pay information with this new definition of employees, as this information may well not sit on one easily accessible payroll.
Given the structure of LLPs, and the fact that gender pay reporting requirements fall on individual entities, it will only be the larger law and accountancy LLPs with over 250 members which may now be within the scope of the gender pay rules
Calculating pay: Pay will only include paid leave (including annual leave, sick leave, maternity and other family leave pay) if the employee is paid at their usual rate of pay
Bonus payment figures: employers will be required to report the median bonus pay gap, in addition to the mean gender bonus pay gap
Pay quartiles will have to be calculated by dividing the workforce into four equal sized groups, as opposed to dividing the overall pay distribution into four equal portions
The ‘snapshot’ date to calculate gender pay gaps will probably be 5 April 2017 (not 30 April 2017). The calculations will be based on the hourly pay rate for each “relevant employee” during the pay period that includes 5 April
The deadline for publishing the information will then be 4 April of the year after the data was collected, so the first deadline will be 4 April 2018 (not 29 April 2018)
What pay information is required?
Pay and bonus information must be provided in relation to all employees and workers and any self-employed contractors, salaried partners and those LLP members who are recognised in law as workers
The mean and median overall pay for each gender. Some variable elements, such as overtime pay, do not need to be included, but others, such as bonus pay, shift premium pay and area allowances are included.
The mean and median bonus payments made to men and women
The percentage of bonus payments which are made to men and women
The number of men and women in each salary quartile
Employers can provide additional context to the pay figures in supporting commentary but they are not required to do this
What do you need to do now?
Check whether, in light of the expected new definition of employees, your organisation will be caught by these rules. If so, take legal advice about the type of information you will need to gather and the consequences of your findings to benefit from legal advice privilege, protecting the confidentiality of the information.
For those organisations which have already carried out a mock pay audit, they should consider the extent to which the expected changes to the reporting rules will impact on their gender pay gap data.
