Out-Law / Your Daily Need-To-Know

Gender pay gap reporting on course for April as final regulations published

Out-Law News | 07 Dec 2016 | 5:30 pm | 2 min. read

New requirements for large businesses to report their gender pay gaps (GPGs) are on course to come into force in April 2017, after the final form of the regulations was laid before the Houses of Parliament.

Lawmakers will need to approve the regulations before they can be brought into force, but do not have the power to amend them at this stage. Gender pay gap reporting is a government commitment, making it very unlikely that the regulations will be rejected by parliament, according to employment law expert Helen Corden of Pinsent Masons, the law firm behind Out-Law.com.

Much of the detail of the new requirements will be set out in accompanying guidance, due to be published by Acas in the new year, Corden said. However, a number of "thorny issues" raised in response to a previously-published draft of the regulations have now been clarified, including the definitions of employees, pay and bonus pay, she said.

Although the intention behind the regulations is to "seek to narrow the GPG over time", Corden said that the new requirements would merely help firms to identify, rather than tackle, any pay gaps in their business.

"Due to the way in which the calculations are to be carried out, using the definition of 'pay' and real-time data, this will not assist firms in carrying out any analysis in relation to where their potential pay gap issues lie," she said. "In addition, it will not assist firms with composing a narrative to accompany their pay gap figure, something which they will almost certainly want to do."

"In order to give a true picture of where within an organisation the gaps lie and what is the cause of those gaps, firms will need to carry out a deeper dive exercise - such as a legally privileged equal pay review," she said.

Once in force, the reporting rules will apply to all private and voluntary sector employers in England, Wales and Scotland with at least 250 employees. Similar rules are due to be introduced for the public sector. Employers caught by the regulations will be required 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. They will also be required to publish the proportion of male and female employees within each 'quartile' of their pay distribution, as well as the proportion of men and women that have beenpaid a bonus in the preceding 12 month period.

The final draft of the regulations clarifies the definition of 'employees' to include anyone in a contract of employment, a contract of apprenticeship or a contract personally to do work. It therefore potentially includes those with 'worker', rather than employee, status, and the self-employed. A clearer definition of pay and a step by step guide to the calculation of 'hourly rate of pay' is also included. 'Bonus pay' is also defined more clearly, together with when remuneration in the form of securities and options should be taken into account.

The regulations are expected to come into force on 6 April 2017, and employers will be required to calculate their first gaps and salary quartiles using the pay period within which the 'snapshot date' of 5 April falls. Data must be published by 4 April 2018 at the latest, and then again by 4 April every year. Employers will be required to publish details of their pay gaps on their websites as well as upload the information to a government website; and a director, partner or equivalent would have to sign off the data.

According to the latest draft of the regulations, failure to comply with any of the new obligations will constitute an 'unlawful act' as defined by the 2006 Equality Act. This means that the Equality and Human Rights Commission would have the power to take enforcement action against firms for breaches of the regulations. Compliance notices issued by the Commission can be enforced by the courts.