Teal blue graphic

Mandatory gender pay gap reporting - consultation launched

The government has recently published a consultation paper on its plans to introduce mandatory gender pay gap reporting for large private and voluntary sector employers. 

The government hopes that mandatory gender pay gap reporting will help to address the overall gender pay gap in the UK, which, according to the Office for National Statistics, stands at 19.1%.

However, whilst it may be a positive step for diversity, it will likely have a number of significant and potentially costly implications for employers.

This article looks at the consultation proposals, what these mean for employers, and what employers can do to prepare.

What are the current reporting procedures?

Currently, there is no statutory obligation for employers to publish gender pay gap information. This is unless an employer is found by a tribunal to be in breach of equal pay law, in which case they can be ordered to complete an equal pay audit. Employers can voluntarily report their gender pay gaps via the "Think, Act, Report" scheme, but are under no obligation to do so.

What will the new mandatory reporting look like?

The new measures will require employers with at least 250 employees to publish information about the pay of their male and female employees. 

However, the details of these new measures – including what, when and how information should be published – are undecided. The government seeks views on what these details should look like in its consultation. 

What does the government seek to consult on?

Issues for consideration include:

  • What information on differences in pay can be calculated by employers from existing data and systems. For example, can employers calculate the difference between the earnings of men and women as a percentage of men's earnings? Or can they break figures down by full and part time employees, grade or job type?
  • How often employers should report gender pay gap information. This will be no more frequently than every 12 months. 
  • Whether a proposed threshold of 250 employees is appropriate.
  • The cut off period for any calculation of the gender pay gap. Examples given include 1 January, 6 April, 1 October and each businesses 'year end'. 
  • Whether there are alternative ways to increase transparency on gender pay that would limit costs for employers, for example, reporting to the government via PAYE.
  • Whether the introduction of civil enforcement procedures would help ensure compliance with the proposed regulations.

The consultation is due to close on 6 September 2015. The government has stated that the results will be published in winter 2015, with draft regulations expected to be published in the first half of 2016. However, the consultation paper suggests that there may be a delayed implementation to give employers time to prepare. It may be phased by company size, in a similar way to pensions auto-enrolment. 

Implications for employers

The introduction of mandatory gender pay gap reporting is likely to be welcomed by employees, leading to increased transparency and impacting positively on diversity.

However, the requirement to carry out and publish gender pay gap reports is likely to have negative implications for employers.

Firstly, all employers will likely encounter costs in complying with the reporting requirements, particularly if new administrative systems are needed in order to generate the required information. Of course, the extent of these costs will depend on the level of information required, which has yet to be decided.

Secondly, but more significantly, those employers publishing a large gender pay gap are likely to experience:

  • negative public and employee relations;
  • adverse impact on employee recruitment and retention; and
  • potential legal claims, for example, collective equal pay claims which could potentially reach back over six years.

As such, whilst a failure to comply with the new rules will likely be a criminal offence, there are no proposals to require employers to meet any specific goals in respect of their gender pay gap. Instead the driving force for greater pay parity will be the desire to avoid being 'named and shamed,' the results of which are likely to be far more damaging.

What should you do to prepare?

  • Consider and take measures to reduce any pay gap. There is time, potentially up to two years, to investigate and improve any gender pay gaps before the reporting regime comes into play. You may therefore want to start identifying and understanding any differentials that exist. You can then address any disparities in particular risk areas and improve your legal and commercial position. An equal pay audit might be beneficial in this respect. 
  • Consider internal infrastructure. You may wish to consider whether your organisation’s internal infrastructure is sufficient to comply with the reporting requirements. In particular the government has suggested that, whatever measure is chosen, employers may want to provide some additional narrative that provides context. This could explain any gender pay gaps and set out what remedial actions the business intends to take. Your organisation will want to be in a position to do this in order to ensure that any disparity in pay is presented in context.
  • Respond to the consultation. The consultation suggests that the government is open-minded about how, and even whether to proceed. You may therefore want to consider whether it is worth investing time over the coming month to respond to the government's consultation in order to ensure that your views and concerns are considered.

To view the consultation click here.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

Insights & events View all