Mind the (Pay) Gap | VWV Employment Law Brief - January 2016
Pay differentials continue to come under scrutiny with the forthcoming introduction of Gender Pay Gap Reporting, and a recent report highlighting the disparity between remuneration for FTSE 100 Chief executives and the average employee.
'Fat Cat Tuesday'
Think tank, the High Pay Centre has recently announced that by Tuesday 5 January 2016 (what it refers to as 'Fat Cat Tuesday') the average FTSE 100 chief executive will have earned more than the average employee will earn for the whole of 2016.
This statistic is particularly topical in the context of a report from ACAS identifying what it views as the key workplace trends for 2016. The report stresses the need for employee engagement as a means of targeting the challenges facing employers in the year ahead, including a suggestion that employees be involved in strategic decision making. One of the specific recommendations in this context is for workers to have a 'voice' on executive remuneration committees, to help address public concerns over the gap in pay between the board room and the wider work force.
Gender Pay Gap Reporting
In 2015 the Government announced that all employers with over 250 employees would be required to publish information relating to their gender pay gap. It is not yet known what information will need to be published, but it is likely that there will be a potential fine for non compliance.
The Government consultation, which took place during the summer of 2015, focused on the type of information that should be included in reports, the frequency of reporting, the frequency of updating and whether or not the threshold of 250 employees is appropriate. The consultation closed in September 2015 and we understand that the responses submitted are being considered. We are awaiting the publication of draft regulations. The present commentary suggests that regulations will not be published before spring 2016 and will not take effect until later in the year, in order to ensure employers have adequate time to prepare for reporting.
Best Practice
We will provide further guidance in respect of the proposed Gender Pay Gap Reporting requirement when the draft regulations are published. In the meantime, we would recommend that all employers (and particularly those with more than 250 employees) undertake preliminary steps to ensure they are prepared for these regulations. It is a good time to review pay policies to ensure these are legally compliant and transparent. If you are concerned that there are inconsistencies amongst employees' pay, which may be highlighted by the reporting requirements, it is a good time to identify these and take appropriate steps to address any discrepancies.