The gender pay gap is the difference between women’s and men’s average earnings.
These FAQs look at the requirements of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations) and some of the common queries associated with the gender pay gap reporting obligations under the Regulations.
The final version of the draft Regulations were published on 6 December 2016 and are due to come into force on 6 April 2017. The Regulations follow a consultation process and it is unlikely that any significant changes will be made before they come into effect.
Should you be interested in a detailed guidance note or tailored support for your organisation please do contact us. We can provide comprehensive support to assist your organisation in meeting its requirement to report gender pay gap information and understand and manage any risks.
The Regulations apply to all private sector employers (including charities) with 250 or more employees.
There are six reports that are required under the Regulations:
We would recommend that organisations accompany the key reports with a narrative and also consider publishing further information if it would add helpful context.
Organisations will be required to rank employees in order of their pay from lowest to highest, then divide the workforce into four equal groups based on their hourly pay rate and show the proportion of genders in each group. This will show the gender profile across an organisation, and critically will not be affected by a few high earners.
There is no requirement to publish to pay rates within each 'quartile', so this report will not disclose senior management pay.
The first report will be based on pay data captured on 5 April 2017. The first report can then be published at any time from 1 April 2017 to 4 April 2018.
It will then be necessary to publish reports annually thereafter:
The definition of 'employees' is broad. It will include most casual staff who have 'umbrella' agreements with employers to undertake work as and when required.
It will also cover any member of staff who works on 5 April, even if there is no ongoing contractual arrangement.
Individuals who are genuinely self-employed fall outside of the scope of the Regulations. However, the Regulations confirm that 'workers' (i.e. individuals who are not strictly employees but who are engaged under a contract to personally perform services for the organisation) will count and should be included.
Organisations should be particularly cautious where they have categories of individuals that are treated as self-employed but from a legal perspective should arguably be categorised as employees or workers. This is likely to be most relevant where the exclusion of these staff means that an organisation falls below the 250 threshold.
Contracted out staff who are provided through cleaning, catering or IT companies (or similar) should be excluded. They will be counted as employees of the organisation that is contracted with. Agency workers are also excluded. Organisations should be aware of the potential impact of outsourcing and insourcing, for example, bringing cleaning or catering in-house, and may wish to consider the timing of any such projects.
The reports on mean pay difference, median pay difference and the pay quartiles are all based on establishing the 'hourly rate of pay' for each relevant full pay employee.
The hourly rate of pay is determined by following a six step process that is set out in the Regulations. In summary, it requires identifying the relevant pay (ordinary and bonus pay) paid during the pay period including 5 April. The Regulations specify which elements of an individual's pay should be taken into account and which should be excluded.
Once you have determined the pay in the relevant pay period it is necessary to divide this by the number of weekly working hours.
In accordance with the Regulations the 'pay' figure should be taken after the deduction has been made for the salary sacrifice scheme.
This may create an artificially low hourly rate for organisations that operate salary sacrifice schemes and you may wish to explain this in the narrative and/or calculate the figures both pre and post salary sacrifice.
The Regulations set out how to calculate working hours where the employee has normal working hours, no normal working hours and undertakes work on a piecework basis.
In the event that an employee has no normal working hours, such as under a zero hours arrangement, the Regulations set out two methods to identify the weekly working hours, firstly, to calculate their average hours over the preceding 12 week period, or, secondly, to identify a number which fairly represents the number of working hours in a week taking into account appropriate circumstances.
You may employ staff who have no defined working hours, or where staff regularly work more than their contractual hours, particularly in the case of senior members of staff. In such situations a sensible assessment should be used. We would recommend a focus on the hours staff are contractually required to be working, rather than time which is under their own control.
We would recommend that in the first instance employers ensure that they understand their own pay data and that it is accurate and can be relied upon.
It will be necessary to understand the information required to produce the six reports and consider the most effective way of capturing this.
It is worthwhile doing a trial run (perhaps with the benefit of legal privilege) to ascertain the extent and nature of any gender pay gap.
Analyse whether the reports create any legal, organisational or reputational risks, and consider a strategy to address these.
Take steps to ascertain the cause of any pay gap so that this can be explained in the narrative or so you can consider the options to close the gap (if appropriate to do so).
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