Out-Law / Your Daily Need-To-Know

UK gender pay gap reporting encouraging firms to go further on diversity

Out-Law Analysis | 26 Nov 2021 | 5:34 pm | 6 min. read

As the six month enforcement ‘grace period’ on UK gender pay gap (GPG) reporting requirements ends, more employers have published their pay gap data – with some bigger firms going above and beyond minimum legal requirements and reporting on other diversity metrics including class, sexual orientation, ethnicity and disability on a voluntary basis.

The move corresponds with the new approach being taken by the government to tackling inequality in the UK. The government’s ‘levelling-up’ agenda focuses on the collection of data from a wider range of metrics than the protected characteristics contained in the Equality Act 2010, including geography and social background. Announcing the government’s equality data programme in December 2020 Liz Truss, in her women and equalities minister role, said that this data would be used to understand the barriers that people from every background are facing to progression, and to inform policy changes to address those barriers.

The obligation for certain organisations to publish annual GPG data was suspended last year due to the challenges presented by the Covid-19 pandemic. This year, the Equality and Human Rights Commission (EHRC) announced that it would not take enforcement action until October 2021 against any employer which had failed to comply with its reporting obligations, an effective six month unofficial extension of the usual April deadline.

Around 6,000 additional businesses have reported their GPG figures for the 2020-21 reporting period since our previous analysis of the trends, in June 2021. The average hourly median GPG among the 10,142 businesses that have now reported in respect of the 2020-2021 reporting period is 12.6% in favour of men – considerably lower than the 16.4% recorded in June and slightly lower than the 15.5% figure reported by the Office for National Statistics (ONS) for 2020. The ONS figures refer to all employers and not just those with more than 250 employees who have a legal obligation to report this data.

Donaldson Susannah

Susannah Donaldson

Legal Director

The risk of enforcement action by the EHRC remains effective in spurring employers on to comply with their reporting obligations, as is the risk of negative publicity and the detrimental impact on employee/union relations

The number of employers who have reported is significantly higher than the 7,008 employers who opted to publish data in respect of the 2019-20 reporting period when the obligation was suspended, and is roughly in line with the 10,840 employers that reported for 2018-19. The figures suggest that the vast majority of employers have taken advantage of the unofficial six month extension of the reporting obligation for 2020-21 and that most employers have now complied with their reporting obligations. It also suggests that the risk of enforcement action by the EHRC remains effective in spurring employers on to comply with their reporting obligations, as is the risk of negative publicity and the detrimental impact on employee/union relations.

Towards a broader understanding of diversity pay gaps

The GPG reporting regulations, introduced in 2017, require employers in Great Britain with 250 or more employees to publish their overall mean and median pay gaps based on gross hourly pay for men and women, expressed as a percentage, as well as their mean and median gender bonus gaps.

Companies caught by the regulations must also publish the proportion of male and female employees within each quartile of their pay distribution, ordered from lowest to highest pay, as well as the proportion of both men and women than have been paid a bonus in the preceding 12-month period.

Tracking data will not by itself do away with systematic workplace inequality and the government has always been clear that the reporting regime is instead designed to promote sustained and positive change over the long term, notwithstanding the way in which the pandemic and furlough scheme are likely to have skewed the data over the past two years. To that end, the government consulted in 2018 on introducing ethnicity pay gap reporting – but is yet to publish a decision on whether, and how, to take this forward.

In a recent parliamentary debate on the topic, prompted by a petition calling for new laws, MPs discussed the challenges to creating a mandatory ethnicity pay gap reporting framework. In particular, small business minister Paul Scully highlighted issues raised by respondents to the 2018 consultation around statistical robustness, anonymity, data collection barriers, the wide range of ethnic groups within the UK and the potential for skewed results.

The consultation itself proposed various options ranging from one pay gap figure comparing white employees to all employees from Black and minority ethnic (BAME) backgrounds right up to multiple figures using the five broad or 18 specific ethnic classifications used by the ONS. The former rightly raises concerns that it is overly simplistic and ignores the different experiences of each ethnic group, while the latter approach risks results that are too diluted and a report that is very complex and granular.

This year, a number of employers sought to provide ethnicity pay gap data on a voluntary basis, driven in part by the increased prominence of the Black Lives Matter movement from summer 2020 onwards and in an attempt to get ahead of any mandatory requirements. We provided examples of initiatives by Barclays Bank, BBC Studios, Centrica and others in our previous article. Since then, the CIPD has published guidance to assist employers seeking to publish this data on a voluntary basis. The CIPD, while recognising the problematic elements of this approach, suggests using a single figure and reporting on eight statistics. Six of these mirror those in the GPG reporting regime while the others – the proportion of the employer’s UK workforce from BAME and other ethnic minority backgrounds and the proportion of employees who have disclosed their ethnicity – are intended to reflect the greater complexities associated with this kind of reporting.

Another recent and major example of work in this area is by PwC, whose recent diversity figures also included a ‘class’ pay gap using social mobility data. On average, staff from a working class background received 12.1% less pay than other colleagues. On disability, PwC found that staff with a disability were paid on average 16.8% less, using median figures.

PwC is not the only employer to report on class pay: Penguin Random House, the book publisher, recently announced its socio-economic pay difference was 16.3%, and its disability pay gap was 21.6%. In the public sector, Tower Hamlets Council was one of the few employers where staff with a disability earned more than staff without a disability: the median pay gap at the local authority was 2.4% in favour of disabled staff.

In the professional services space, KPMG also recently published its overall class pay gap, of 8.6%. To drive even greater progress, it has also set a target of having 29% of its partners and directors coming from a working class background by 2030. Currently, 23% of the firm’s partners and 20% of its directors are from a working class background.

Laura Starrett

Associate, Pinsent Masons

Employee networks build a sense of community and play a critical role in helping to shape the diversity and inclusion journey within organisations, ensuring long-lasting change

Laura Starrett, co-chair of the Social Mobility Champions Network at Pinsent Masons, welcomes this data-driven approach, which “creates a platform to set clear targets which help move the needle on diversity and inclusion”.

“I believe that employee networks build a sense of community and play a critical role in helping to shape the diversity and inclusion journey within organisations, ensuring long-lasting change,” she said.

The messaging from the UK government is that more needs to be done to drive social mobility as part of its ‘levelling up’ agenda. Again, though, there is a challenge around what data should be collected and how it should be categorised as well as, more broadly, ensuring positive employee buy-in by explaining why the data is being collected and how it will be used. Any data collection exercise will only ever be as good as the data that employees are willing to volunteer.

In our experience, employers are at a very early stage on social mobility. A starting point is to think about how the data gathering exercise will work, including the categories of data they may want to collect: examples include what type of secondary school the individual attended; the type of university; the type of job occupied by parents and whether they attended university; and eligibility for free school meals.

Once the data is collected and the employer’s current position established, the next step is to develop a strategy to tackle any gaps identified together with clear targets.

Closing the gender pay gap

The EHRC, in conjunction with the Chartered Management Institute (CMI), recently published a toolkit containing practical actions to help employers address their gender pay gaps (22-page / 1.76 PDF). The document includes:

  • real-life case studies from businesses which have successfully used their reporting requirements to make their organisations more competitive, increase employee engagement and attract new talent;
  • five recommended actions to improve outcomes for gender equality;
  • links to resources.

This will be familiar territory for many employers who have already fully engaged with gender pay gap reporting to help drive change. However, it is a useful resource for those employers who want to enhance the value of such reporting in bringing change.