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Pay Gap Reporting Bonus

Pay Gap Reporting Bonus

Government plans to tackle gender inequality in workplaces were firmly back on the agenda this week. In terms of the gender pay gap, we have the first indication on what businesses will need to publish as part of the mandatory reporting rules that will come into force next year. You may have seen my blog last month on the end of the consultation period about how these rules should work in practice.

On Sunday, David Cameron and Equalities Minister Nicky Morgan announced that employers will have to publish information about bonus payments as part of their wider reporting duties. While the results of the consultation are expected this winter, this is an early indication that the government will be taking a broad-brush approach to wages and salary.

The government’s rationale is that bonuses, particularly discretionary bonuses, can be a significant contributor to disparate levels of pay between genders. Businesses should be aware that their bonus structures and payments will soon be subject to new levels of scrutiny and transparency. Key things to consider are ensuring open and objective criteria for bonus awards and to guard against any subconscious bias/discrimination.

The government also announced plans to extend the mandatory pay gap reporting requirements to the public sector. The consultation had taken place on the basis that the rules would be aimed at private and voluntary sectors only, so it will be interesting to see how the duties for public sector bodies will be framed. In Scotland there is already a duty on public sector employers with at least 150 employees to publish their gender pay gap information every two years. At the start of this month Nicola Sturgeon announced plans to reduce the threshold from 150 employees to just 20.

Moving away from wages to governance, today Lord Davies issued his report on gender equality in the boardroom. The report celebrates the fact that the percentage of women on FTSE 100 boards has more than doubled to 26.1% since 2011. The aim is now to have this increased to 33% for FTSE 350 companies by 2020 and to eradicate all-male boards (there are 15 remaining on the combined list). Notably, however, there is still some way to go for executive positions. Just 9.6% of executive directors in the FTSE 100 are women, representing 26 out of the 286 women sitting on boards.

Lord Davies is continuing to favour a voluntary, business-led approach, relying on the companies, the market and investors to drive the change without legal intervention. Many counties in Europe, including Norway, France and Germany, have mandatory quotas but Lord Davies recommends against their introduction in the UK.

This is consistent with the current proposals for the rules on gender pay gap reporting, where the only legal obligation will be to publish information. There is not expected to be any sanctions for companies who demonstrate too high a gender pay gap, the idea being that publicity and business (not legal) pressures will bring about the closing of the gap.

There are a number of important questions that remain unanswered in relation to gender pay gap reporting, however. Hopefully when the results of the consultation are published this winter, details of what information must be published and where and when will become clear.

Morag Hutchison
Partner

LChalmers