Gender Pay Gap Reporting - What May Be on the Horizon?
The House of Commons' Business, Energy and Industrial Strategy (BEIS) Committee has published its first report following its inquiry into Corporate Governance: Delivering on fair pay, which was launched in March 2018.
The inquiry focused on the adequacy and effectiveness of the requirements introduced under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations) for all private sector employers with 250 or more employees to report their gender pay gap statistics annually from April 2018. Whilst the focus of the inquiry is on business, the Committee notes that many of its conclusions apply equally to public and voluntary sector organisations.
The gender pay gap measures the difference in the hourly earnings of men and women. The median gap across the economy is currently 18% in favour of men. At organisational level the figure in some sectors is much higher, as wide as 40%.
In its report, the Committee welcomes the gender pay gap reporting initiative, but calls on the Government to be more ambitious. It concludes that addressing the gender pay gap is not only necessary in the interests of fairness, it is essential to improving our economic performance.
The report focuses on the need for businesses to drive change through their policies, practices and workforce cultures.
Recommendations
The Committee have made a number of recommendations for strengthening gender pay gap reporting and for businesses and regulators to drive change in tackling the gender pay, which include:
- reporting requirements to be extended to companies with 50 or more employees from 2020 as evidence shows that pay gaps are higher in smaller businesses
- a mandatory requirement that reporting should include a narrative explanation for pay disparity, and be accompanied by an action plan to tackle the gender pay gap (currently such reporting is optional)
- giving the Equalities and Human Rights Commission specific enforcement powers, to levy fines for non-compliance
- a call for the Government to alter the reporting requirements to include partner remuneration, as well as improving the quality of the guidance on calculating the figures to ensure the highest earners' data is captured.
Best Practice
It remains to be seen which (if any) of the above recommendations will be taken forward by the Government. However it is increasingly likely that we will see the reporting thresholds in the Regulations lowered to include smaller businesses than those with 250 or more employees. We will keep you updated with developments in this area.
The report notes that the Committee will continue with the second strand of its inquiry, examining progress of reforms relating to executive pay levels and structure, in the autumn of 2018.