Forcing employers on Gender Pay Reporting: closing the gap

The Equality and Human Rights Commission (EHRC) has issued a consultation note setting out their planned approach to employers who fail to comply with the new obligations under the Gender Pay Reporting Regulations 2017. Large employers in the private sector must report their mean and median pay and bonus gaps and gender profiles by reference to pay bands, by 4th April 2018. According to one report less than 400 of the 9,000 employers caught by the Regulations have published their figures.

What risks might be run by organisations which fail to report or do so inaccurately?

Enforcement strategy

When the Gender Pay Regulations were implemented last year, one of the questions left unanswered was what penalty for non-compliance applied because this was not evident on the face of the Regulations themselves. Given they were brought into effect under powers in the Equality Act 2010, it comes as no surprise that in the absence of specific penalties in the Regulations, enforcement will be via general powers for unlawful acts in the Equality Act 2006.

The EHRC’s consultation paper sets out their priorities, identifying the process that would be followed but more importantly which failures, and therefore employers, will be coming under scrutiny first. Although this is the official approach, adverse attention both within the workforce and from the press and stakeholders, is be likely where no reporting is provided. This is in addition to attracting attention when poor figures or questionable reports are published (as we have already seen from a recent report in the Financial Times when some named employers who had reported came under scrutiny).

Priorities

First to come under close analysis will be those who do not report at all by the due date. The EHRC’s assessment will have to be limited to the specific data fields set out in the Regulations, rather than the good practice expectations/recommendations such as the employer’s action plans and how they explain or will address any pay gaps.

• the EHRC say they will monitor which employers have published and during 2018/19 plan to focus their enforcement activity on this group, and
• the accuracy of figures will be analysed later.

Another area of focus will be whether specific industries or sectors have a higher rate of non-compliance. If a specific trend is identified by industry sector, this may mean closer scrutiny is given with the potential for a sector focused investigation to get underway. Trade and regulatory bodies may have a role to play here.

How to enforce & formal action

In accordance with their usual processes, the starting point for the Commission will be to launch an investigation into non-compliance by a specific employer. Before doing so the Commission says that they would seek informally and in correspondence to highlight the failure and reach agreement: ultimately have the data published by an agreed deadline. Compliance, to avoid more formal action, would have to be achieved within 42 days of written notification.

If this informal route does not achieve the desired outcome, a formal section 20 investigation will begin, with terms of reference drawn up (notice of which must be served on the employer and on which the organisation is entitled to make representations). A timetable will then be established requiring evidence and information to be provided and a final report issued. If this investigation confirms valid concerns (either non-compliance or inaccuracy) the EHRC will seek a formal agreement with the employer (known as a section 23 agreement) or, if that cannot be achieved, an unlawful act notice may be served.

Orders may be issued requiring the production of evidence as well as corrective action where an unlawful act notice is served; and if not addressed or complied with, an employer could be ordered to pay a civil court fine at level 5, which means it is not subject to a statutory limit.

Other levers

In the writer’s view, the most significant item set out in the enforcement strategy is the early plan to monitor compliance and which employers have published their gender pay gaps. The Commission plans to resort to social media in the period in the run up to 4th April (30th March for public sector employers) and immediately after the deadline, post the number of employers who have and have not complied. That number should be closer to the FT figure of 9,000 by then. There does not at present seem to be a plan to name and shame those who do not comply, just the numbers; this may change going forward particularly where the numbers not publishing become smaller and a more focused group.

Conclusion

The EHRC has used its enforcement powers sparingly over the years, informal resolution and agreement with employers appear to be the preferred approach; most employers would seek to resolve before more formal action is taken (especially larger organisations caught by GPR). What we have seen previously are sector or industry inquiries.

Having set out their plans, the EHRC is looking for comment by February 2018 before they go live with this suggested approach.

For an overview of the GPR provisions see here.