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Mind The Gap

Mind The Gap

Plans to introduce mandatory pay gap reporting took a step closer this month when the government’s consultation period ended. The consultation was launched in July, and employers had been asked for their input on the new rules which will force companies with at least 250 employees to publish their pay gap information.

The gender pay gap is the difference between the average wages of men and women in the UK. The Office for National Statistics calculates this as currently 19.1%. The pay gap is not about salary inequality on an individual level; the Equal Pay Act 1970 made it illegal for men and women to be paid differently for doing the same work. Instead, it is about looking at the whole workforce and comparing the average male salary against the average female one.

Leaving aside unlawful discrimination, there are clearly a number of complex factors contributing to this gap. Underrepresentation of women in senior roles, maternity leave and childcare will all have an impact. Women are much more likely to work flexibly or part-time than men. The traditional career paths for women are often lower paid than those traditionally dominated by men: almost 80% of the health and social work sector are women, while only around 7% of engineers are female.

 “What gets measured, gets managed. What gets publicly reported, gets managed even better.”

The regulations aim to introduce unprecedented levels of transparency. The idea is that employers with a pay gap can start to explore the causes of it and take steps to address it. By making the issue public, employers should have a greater impetus to tackle their pay gap. Negative publicity could jeopardise their ability to attract and retain talent or investment.

With that in mind, it is not proposed that the regulations will introduce penalties for employers with too large a gender pay gap, or introduce requirements on employers to take proactive steps to reduce their pay gap. Failure to report, however, could result in a criminal offence and a fine of up to £5,000.

There are significant legal risks to be aware of though. Reports could provide employees and trade unions with the evidence needed to pursue high value discrimination or equal pay claims. Large private sector employers could now find themselves more at risk of the mass equal pay claims that we have seen in the public sector in recent years.

It is still uncertain what the finalised regulations will look like. The government had been asking for employer’s views on a wide range of things, including where the information should be published and how often.

There is still little guidance on exactly what will need to be published. The government acknowledged in the consultation that a single pay gap figure will not contain the level of detail required to explain the differences, but did not ask for input on what should be published. Instead they asked what figures employers are currently able to calculate. It remains to be seen whether the figure will be broken down by grade or job type, by full or part time status or something else. Whichever one it is, employers will likely be able to accompany it with a statement explaining the context behind their pay gap figures.

There are things that employers can do now to prepare for publishing their pay gap information when the rules come in.

  • Investigate: carry out a review of average male and female salaries. Employers could consider breaking these down by job type and full and part-time status. Many employers could be unaware that they have a gender pay gap, so it pays to get ahead of the game.
  • Consider: consider the reasons for a pay gap (if any). They could consider consulting with staff to get their input. In particular, employers should watch out for subconscious bias or discrimination when assessing suitability for a job or promotion.
  • Action: if appropriate, employers can implement an action plan to help reduce any pay gap. This could be through revisiting maternity and shared parental leave regimes, introducing training on subconscious discrimination, reviewing promotion criteria and considering changes to salaries.

The results of the consultation are expected later this year, with the regulations to follow in the first half of 2016. It will be interesting to see what the consultation results show, but in the meantime employers should get prepared.

Morag Hutchison
Partner

This article was published in The Herald on Monday 21 September 2015. A link to the article can be found here.

LChalmers