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Reporting reforms: payment practices, gender pay gap and non-financial information

2017 will see the introduction of a raft of new reporting requirements for large organisations.

Obligations to report on payment practices and gender pay gaps are expected to come into force in April. Meanwhile changes to the UK's narrative reporting regime have already come into effect requiring certain large companies to disclose a range of non-financial information in their strategic reports.

Payment practices reporting

What's changing?

The government has recently published an updated set of draft regulations (the Reporting on Payment Practices and Performance Regulations 2017) together with guidance on how to comply with the new requirements. The regulations have been introduced by the Small Business Enterprise and Employment Act 2015 and are expected to come into force in April 2017.

The regulations provide that large companies and LLPs must report on their payment practices on a Government web-based service every six months, providing information about their standard payment terms and the proportion of invoices paid within certain timeframes. Failure to publish a report will amount to a criminal offence, with the company and its directors liable to a fine.

The revised regulations will affect companies that are classed as large sized companies under the Companies Act 2006. To fall into this definition, an organisation must meet two or all of the three following requirements:

What do you need to do to prepare?

Businesses should review the BEIS guidance and examine their existing payment practices to identify areas in which improvements can be made if necessary. It would also be advisable to designate a person within the business to take responsibility for ensuring compliance with the requirement to prepare and publish the report.

Organisations will also need to consider putting in place internal procedures governing their payment practice policies and developing internal systems which allow the collation of the data necessary for compliance with the duty.

Gender pay gap reporting regulations

What's changing?

The latest draft of the gender pay gap reporting regulations was published on 6 December 2016 and, subject to Parliamentary approval, they are expected to come into force on 6 April 2017.

The regulations will impose a requirement on private and voluntary sector employers with 250 or more employees to publish data on:

  • The mean and median gender pay gap.
  • The difference in bonus payments paid to male and female staff.
  • The proportion of male and female staff who receive a bonus.
  • The number of female and male staff in each quartile of the employer's pay distribution.

ACAS has published guidance, which provides practical advice on how to carry out gender pay gap reporting calculations, clarification of some of the key provisions in the regulations, and 'essential considerations' on how employers can reduce the gender pay gap. 

Once the regulations are in force, employers will be required to publish their gender pay gap information annually, on their own websites as well as on a government website. We can expect potential job applicants to compare and contrast employers' data on the government website and therefore we recommend that your figures are accompanied by a voluntary narrative to explain gender pay gaps (if any) and the work employers are doing to reduce these.

The snapshot date for collecting data is 5 April 2017, meaning that the first reports will be due on 4 April 2018 and every anniversary of that date.

What do you need to do to prepare?

The first report under the regulations will capture data from the pay period incorporating the snapshot date of 5 April 2017. In addition, bonus calculations will take account of all bonus payments received by employees in the 12 month period preceding the snapshot date (i.e. 6 April 2016 to 5 April 2017). It is therefore important that employers captured by the reporting requirements, check that they are able to collate the relevant data and consider the reasoning behind any gaps and how this information can be presented.

Whilst the gender pay gap differs to equal pay claims, employers should be alert to the possibility that a significant gender pay gap may lead to equal pay queries from employees. 

Non-financial reporting

What's changing?

The updated narrative framework, which implements the EU Non-Financial Reporting Directive, requires large companies to include a non-financial statement in their strategic report in relation to the financial years beginning on or after 1 January 2017. The revised framework applies to "large undertakings which are public interest entities (banks, insurers, financial services and listed companies etc.) and have more than 500 employees".

As part of the new reporting obligation, these companies will now have to disclose a range of non-financial information relating to environmental, social and employee-related matters, respect for human rights and anti-corruption and bribery issues.

The statement will need to include a description of the company's business model and policies relating to non-financial information as well as the outcome of these policies. The new requirement also includes the need to report on the relevant principal risks and how the company managed them. If the company does not pursue non-financial policies, it must provide a clear indication of the reason for not doing so.

The EU Directive also contains a diversity policy element which has been implemented by the FCA through changes to the Disclosure Guidance and Transparency Rules (Rule 7.2). This provision concerns the requirement for large listed issuers to disclose information about their diversity policy in the corporate governance statement of the Annual Report and applies to relevant issuers for financial years starting on or after 1 January 2017.

What do you need to do to prepare?

To ensure compliance with the non-financial reporting obligation, relevant organisations will need to start getting to grips with what information they are obliged to disclose and consider allocating responsibility for compliance. This would include the ongoing task of monitoring policy outcomes, as well as the requirement to produce the statement.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

 



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