Gender pay reporting: the Government's response

Introduction

Draft Regulations implementing the Government’s requirement to disclose gender pay information have already been laid before Parliament. (For a summary of the draft Regulations see Acas guide on gender pay gap reporting out this month.

The Government has now issued its response to the consultation which informed drafting of the regulations - Mandatory Gender Pay Gap Reporting: Government response to the consultation on draft regulations.

The response does not contain any particular surprises or new information as the changes made were picked out in our analysis of the draft regulations. What is, perhaps, interesting, are those issues where the response gives a little more information on the reasoning behind changes. Most notable, are the numerous references to further guidance being provided in the non-statutory guidance which is still be developed (and which is expected to be published after the regulations have received approval). Similarly, the response highlights the role of the optional narrative. It clearly states that whilst this is voluntary, it will be strongly encouraged and gives various examples of cases where an employer might consider including voluntary narrative.

Some of the areas highlighted in the response are set out below.

Commencement

• Regulations commenced in April 2017.
• The Government will provide a package of support to help employers calculate and address their gender pay gap, including: 
  • a campaign of myth-busting UK-wide events and multimedia guidance to help employers calculate their gender pay gap, gender bonus gap and the numbers of men and women at different pay quartiles
  • targeted support for smaller employers, and those in sectors that are least advanced on gender equality (eg science, technology, engineering, or math (STEM)), and
  • sharing best practice of exemplars.

Relevant date

• The change of the “snapshot” date from 30 April to 05 April.

Scope

• The 250 or more employees threshold applies to all employed on the snapshot date irrespective of length of service.

Subsidiaries and groups

• Reporting requirements apply to each separate legal entity with at least 250 employees within a group structure (not at group level).
• The non-statutory guidance will make it clear that if a group of employers feel that disclosure on an entity basis may be misleading, an option would be for voluntary disclosure of gender pay gaps across the wider group, in order to provide context to the results for each employing entity. Corporate groups will be encouraged to disclose gender pay gaps across the wider group on a voluntary basis if their senior leaders, board members and shareholders consider that informative and appropriate.

Defining pay

• The non-statutory guidance will clearly outline which elements of remuneration should and should not be captured in pay gap or bonus gap calculations.
• Parental leave and statutory pay: having the gender pay gap calculation take statutory pay (eg parental leave and sick pay) or other paid leave at less than full pay into account does not compare like-for-like in terms of average hourly earnings. Asking employers to use notional earnings before the statutory pay period would not align with the "snapshot" methodology and risks becoming too complicated for employers to implement. The calculations will cover only those employees receiving their full pay during the specified pay period. For example, a man or woman taking parental leave or sick leave on full pay will be included, but an employee receiving less than full pay while on parental leave or sick leave will not be included. This approach will ensure a meaningful earnings comparison.
• Overtime and shift pay: overtime remains excluded from the definition of "pay" but shift pay remains included. The Response notes that if an employer finds that female employees’ earning potential is being depressed because they need to work family-friendly (rather than sociable) hours, many will want to highlight the impact of those wider cultural drivers for the gender pay gap within their voluntary contextual information.
• Expenses: excluded from the gender pay gap calculation as they are generally reimbursements for money expended by the employee and are not regular payments earned as part of a remuneration package. 
• Allowances: the Regulations clarify that the calculations must include all those allowances paid in money that have been earned in the pay period as part of the employee's job.
• Salary sacrifice schemes and benefits in kind: The gender pay gap calculation continues to exclude salary sacrifice schemes and benefits in kind. If an employer finds that their published pay gap has been distorted as a result of gender differences in the take-up of such schemes or benefits in kind, they will be encouraged to highlight that in their voluntary contextual information. For example, it would be significant if an employer identifies that the earnings of women employees are disproportionately affected by absorbing costs associated with childcare as part of a salary sacrifice scheme.
• Company cars and car allowances: As no consultation responses provided evidence of gender differentials in the numbers of male and female employees who opt for a company car as a benefit in kind, the Government does not believe that excluding them from the calculations outlined in the regulations will unfairly skew the results. Car allowances paid through the payroll will be included within the calculations to ensure consistency with the wider approach to paid allowances. For the purpose of gender pay gap reporting, it is not directly relevant whether an individual employer regards the provision of a company car or car allowance as a perk or a necessity.
• Redundancy, severance and termination: all severance and termination payments are now excluded.

Defining employees

• Guidance will be provided to help employers to identify which employees are within scope.
• The regulations have been amended so that it is clearer that the Government intends the regulations to apply to employees within the meaning of section 83 of the Equality Act 2010:
  • any employees within the meaning of the Act who are remunerated during the reference period would be included, such as zero-hours contractors, apprentices and some consultants
  • those who are not based in Great Britain but are still regarded as being employees of employers within scope could still be covered because of a strong connection with Great Britain.
  • self-employed people (those who are not employees for the purposes of the Equality Act 2010) should not be included in the overall gender pay gap calculations, and 
  • agency workers will be taken into account by the employer with whom they have the contract of employment, and this will generally be their agency.

Bonuses

• Bonuses received: bonus payments made in securities, interests in securities and securities options are now captured by reference to income tax liability, as this the Government believes that this is the easiest and most consistent way for employers to value bonuses paid other than in cash. Clear guidance will be provided on how to comply with the gender bonus gap reporting requirements. 
• Calculating bonus gaps: If a gender bonus gap has been skewed where a percentage bonus has been paid to full-time and part-time employees, that employer may want to highlight that in their contextual information.
• Median gender bonus gap: now included as the best representation of the typical difference because it identifies the bonus paid to the middle recipient.
• Proportions receiving bonuses: refined so that only those only those employed on the relevant date need be captured.

Salary quartiles

• Revised so that the proportion of male and female employees within each quartile is included instead of the overall number of male and female employees. Detailed revision to the regulations sets out how an employer should generate quartiles.

Narrative

• Voluntary, but will be strongly encouraged within the guidance accompanying the regulations.
• Non-statutory guidance will include advice about the voluntary contextual narrative.
• Reporting by age has not been included as an additional requirement but the non-statutory guidance will suggest that some employers may find it useful to provide this information as part of their voluntary narrative.
• Action plans: although the regulations do not require the publication of action plans, the non-statutory guidance will encourage employers to do so voluntarily where appropriate.
• Overtime and shift pay (as above) if an employer finds that female employees’ earning potential is being depressed because they need to work family-friendly (rather than sociable) hours, many will want to highlight the impact of those wider cultural drivers for the gender pay gap within their voluntary contextual information.
• Salary sacrifice schemes and benefits in kind (as above) if an employer finds that their published pay gap has been distorted as a result of gender differences in the take-up of such schemes or benefits in kind, they will be encouraged to highlight that in their voluntary contextual information. For example, it would be significant if an employer identifies that the earnings of women employees are disproportionately affected by absorbing costs associated with childcare as part of a salary sacrifice scheme.
• Calculating bonus gaps: If a gender bonus gap has been skewed where a percentage bonus has been paid to full-time and part-time employees, that employer may want to highlight that in their contextual information.

Publication

• Online publication: revised so that no specific reference to publishing information on a UK website (just an accessible website).