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Mind the gap: UK gender pay reporting

Mike Hegarty

In the eventful political calendar of the last few months, one piece of very encouraging legislation slipped through almost unnoticed. The UK’s Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 was passed by Parliament earlier this month to little fanfare, but has far reaching implications for employers and, it is hoped, for the fortunes of working women in the UK.

What is it?

The Act requires companies to publicly report information on four key metrics concerning the gender pay gap:

  • Overall mean and median gender pay gaps within a 12 month period
  • Difference between the mean bonus payments paid to men and women (only including employees who received the bonus) for 12 month period
  • Proportion of male and female employees that received bonus
  • Report on the number of men and women in each quartile of their pay distribution

Who does it apply to?

Legislation applies to UK employers in the private and voluntary sectors with 250 or more employees on the 5th April of a given year.

Employers must base their calculations on ‘full-pay relevant employees’, meaning that employees being paid at a reduced rate, or indeed forgoing pay due to maternity, parental, sick or special leave may be discounted from a company’s final figure. Maternity pay had initially been included in the original, but feedback on the initial consultation pointed out that maternity pay could skew the figures. Pay must include any bonuses, share options or other types of in-kind remuneration.

The government has provided detailed guidance on how to reach the final figures, which can be found here.

When does this happen?

It’s happened already – passed, signed, done!

That said, companies have some time to get their house in order. They are required to publish an initial ‘snapshot’ of the data they have currently by 5th April 2017 – even if it is not precisely compliant with the requirements of the legislation at this stage.

Employers are then required to publish their full gender pay gap information within 12 months of this date, which means that employers will need to publish their first gender pay gap reports by 4 April 2018 at the latest, and every year thereafter.

How is it going to be enforced?

It’s suggested that failure to comply will constitute an ‘unlawful act’ that the Equality and Human Rights Commission (EHRC) could be able to penalise. However, the nature of any potential penalty is unclear – furthermore the legislation deals with such a number of companies that it’s not clear whether EHRC will have resource to meaningfully act as an enforcer. In any case, transparency and voluntary performance improvement are the legislation’s intended outcomes. Reporting and transparency initiatives have driven improved business performance in a number of other critical areas, such as in reducing greenhouse gas emissions. It is hoped that enforcing mandatory reporting will do the same for gender equality.

OK, so what does this mean, and what should companies do?
Corporate Citizenship welcomes this legislation as an opportunity for action. The business case for gender diversity is growing stronger – from improved talent attraction and retention, to better decision making at board level, to reduced reputational risk – not to mention that there is a growing interest in gender diversity indicators from both ESG and mainstream investors.

At a seminar recently run by MSCI on the topic of Women in Finance, we heard that millennial professionals are supportive not only of gender pay audits, but also increasingly back mandatory gender quotas for company boards. Improving organisational gender diversity is fast becoming more than a strategic priority – it is set to become a formal regulatory requirement.

We offer tailored support for companies that want to focus specifically on gender diversity in their workplace.  Corporate Citizenship’s framework, The Gender Diversity Accelerator, outlines how to put a strategy in place and identifies clear actions that businesses can take to create a more inclusive workplace. To find out more, see our Gender Diversity service page.

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