Gender Pay Gap reporting for Public Sector Organisations - FAQs
These FAQs look at the requirements of the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 (the Regulations) and some of the common queries associated with the gender pay gap reporting obligations under the Regulations.
The first, and what is considered to be the final, version of the draft Regulations were published on 23 January 2017 and are due to come into force on or before 31 March 2017 and aim to facilitate increased performance of the Public Sector Equality Duty (PSED).
The Regulations follow a public consultation last year, although the Government has not yet released its response. The Regulations largely mirror the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, which apply to private sector employers.
- Which organisations do the Regulations apply to?
- How do the Regulations differ from the regulations relating to private employers?
- What is the Public Sector Equality Duty?
- What pay gap information needs to be reported on?
- What is a pay quartile?
- When is it necessary to produce the first report?
- Do casual members of staff count as 'employees'?
- Do self-employed staff count?
- How do you undertake the calculations which underpin the reports?
- What is the hourly rate of pay?
- What happens if we operate a salary sacrifice arrangement?
- How do you calculate working hours?
- Publication of information
- What should our organisation be doing to prepare for the Regulations?
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.
Which organisations do the Regulations apply to?
The Regulations apply to all public sector employers listed in Schedule 2 of the Regulations, that have 250 or more employees.
This includes local authorities, further and higher education institutions, academies and fire and rescue services.
It should be noted that for the purposes of the Regulations, an employee of an English maintained school should be treated as an employee of the Governing Body. Governing Bodies are included in Schedule 2, but the obligation to report is only on organisations with 250 or more employees. The practical effect of such a distinction means that a local authority who would normally be classified as the employer of persons at certain maintained school will need to exclude such persons for the purposes of calculating the gender pay reports and that many maintained schools will fall below the threshold for reporting.
It should be noted that generally the Regulations only apply to public authorities in England. If you are unclear as to whether or not your organisation is in scope, you should firstly check Schedule 2 or seek advice.
How do the Regulations differ from the regulations relating to private employers?
There are two key differences, firstly, the requirement to report forms part of the existing public sector equality duty (PSED). The Government proposes the repeal of the Equality Act 2010 (Specific Duties) Regulations 2011 and the introduction of the Regulations. Schedule 1 of the Regulations sets out the requirements in relation to gender pay gap reporting.
Secondly, the 'snapshot' date that will be used to collate the relevant pay data will be 31 March, as opposed to 5 April for private sector employers.
What is the Public Sector Equality Duty?
Under the Regulations every public sector authority listed in Schedule 2 must demonstrate that it has complied with section 149(1) of the Equality Act 2010 which states that:
1. A public authority must, in the exercise of its functions, have due regard to the need to:
- eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act
- advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it
- foster good relations between persons who share a relevant protected characteristic and persons who do not share it.
In order to demonstrate compliance, the Regulations state that public sector authorities must undertake the following:
- publish the information to demonstrate compliance with the PSED, in particular information about employees who share a relevant protected characteristic by no later than 30 March 2018 and going forward annually (at intervals of no more than one year from the last publication)
- prepare and publish one or more objectives relating to section 149(1) of the Equality Act 2010 by no later than 30 March 2018 and going forward at intervals of no more than four years.
NB, the requirement to report information about employees sharing a relevant protected only applies to public authorities with over 150 employees. In addition, where a public authority has already complied with the PSED set out in the current 2011 regulations within the four year period ending on 30 March 2018, it will only be required to publish its objectives within four years from the last publication.
In addition, the requirement to report gender pay information now forms part of the requirements of the PSED.
What pay gap information needs to be reported on?
There are six reports that are required under the Regulations:
- The difference in mean pay between genders (expressed as a %)
- The difference in median pay between genders (expressed as a %)
- The difference in mean bonus payments between genders (expressed as a %)
- The difference in median bonus payments between genders (expressed as a %)
- The proportion of men and women in the workforce that received a bonus
- The number of men and women in each quartile of the pay range.
We would recommend that organisations accompany the key reports with a narrative and also consider publishing further information if it would add helpful context.
What is a pay quartile?
Organisations will be required to rank employees in order of their pay from lowest to highest, then divide the workforce into 4 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.
When is it necessary to produce the first report?
The first report will be based on pay data captured on 31 March 2017. The first report can then be published at any time from 1 April 2017 to 30 March 2018.
It will then be necessary to publish reports annually thereafter:
- For the pay reference period March 2018 no later than 30 March 2019
- For the pay reference period March 2019 no later than 30 March 2020 etc.
Do casual members of staff count as 'employees'?
The definition of 'employees' is broad and so will include casual staff who undertake work on 31 March in each year, even if there is no ongoing contractual arrangement.
It will also include those who have 'umbrella' agreements to undertake work as and when required, regardless of whether any work is undertaken on 31 March.
Where the inclusion or exclusion of 'casual staff' is likely to prove critical as to whether an organisation has 250 or more employees, you may want to do a closer analysis of working arrangements prior to March 2017, in order to assess the options available.
Do self-employed staff count?
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.
How do you undertake the calculations which underpin the reports?
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.
What is the hourly rate of pay?
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 31 March. 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.
What happens if we operate a salary sacrifice arrangement?
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.
How do you calculate working hours?
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.
There will be specific considerations for different types of organisations that are caught be the Regulations. For example, the Regulations do not specifically deal with term-time only working arrangements.
Publication of Information
The regulations applicable to private sector organisations require the pay gap information to be accompanied by a written statement by a director or equivalent. However, there is no equivalent requirement in the Regulation, presumably because it falls within part of the PSED. However, the gender pay information must be published on your organisation's website, in an accessible manner for at least three years. It must also be published on a government specific website.
What should our organisation be doing to prepare for the Regulations?
We would recommend that in the first instance you ensure that you understand how your own pay data system works and satisfy yourself that it is accurate and can be relied upon.
It will be necessary to understand the information you will need to produce the six reports and consider the most effective way of capturing this, perhaps in discussion with your payroll provider.
It is worthwhile doing a trial run (perhaps with the benefit of legal privilege) to ascertain the gender pay gap and so you have advance warning of what the gender pay gap will be and what the reports will look like.
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).
For all organisations it is helpful to have a transparent and robust pay policy so that everyone within the organisation understands how pay decisions are made.