Gender pay gap reporting in the United Kingdom

The draft regulations on reporting statistics outlining the potential gender pay gap at U.K. companies were published in early February this year, and reactions to the regulations have on the whole been positive, because their aims are part of other broad measures to address the wage gap, says Jillian Naylor, employment partner at U.K. law firm Linklaters. In addition, the regulations already align with some companies that already have programmes in place to address the issue.

Initially, the government tried to introduce the regulations voluntarily, but only a limited number of companies signed up. The rules apply to all employers with 250 or more employees who ordinarily work in Great Britain and whose contract of employment is governed by U.K. law. A snapshot is taken as of 30 April each year. They come into force on 1 October 2016, although employers will not be expected to publish the required information immediately, and a snapshot will be taken as of 30 April each year.

When the rules are finalized, organisations will have to pay attent to five key pieces of information that must be published each year:

The difference in mean pay between male and female employees for the “pay period.” The pay period is the week, month, or other pay period used by an employer within which 30 April falls.

The difference in median pay for the same groups.

The difference in mean bonus pay between male and female employees for the 12 months up to 30 April.

The proportion of male and female employees who received bonus payments in the 12 months up to 30 April.

The numbers of male and female employees in each pay quartile.

This final set of statistics is intended to provide an indication of whether or not there are more men or women in lower or higher paid jobs, with the definition of pay consistent to that used by U.K. Office of National Statistics.

“Going forward, the main concern is compliance. Our clients don’t want to fall foul of the regulations so they need to understand exactly what is required in order to put systems in place so that the statistics can be generated.”
Jillian Naylor, Employement Partner, Linklaters

It includes: basic pay, paid leave, maternity pay, bonus pay (including commission, long-term incentives and the cash-equivalent value of shares) and the cash value of any car allowance, as well as on call and standby allowances and area allowances. It does not, however, include overtime, expenses, or benefits and perquisites. The information must be published on the employer’s website within 12 months of 30 April each year and must be accessible to all employees and the public. It must also remain on the website for three years.

 Prior to the publication of the final rules the government is conducting one last consultation, asking:

“What, if any, modifications should be made to these draft regulations?  To inform our consideration of any proposed modification(s), please explain your response and provide supporting evidence where appropriate.”

Naylor notes that since there is only one question and a short period for response (the period closes on 11 March 2016) it is likely that any responses are not going to change the regulations significantly. The government is simply looking for any good suggestions for modifications, either tightening or making clearer the language used. “The first round of consultation,” says Naylor, “was much broader and was difficult to respond to as employers did not know what the government was proposing. Now with the draft regulations published comments will be more focused.”

Details of the consultation and the regulations themselves and an impact assessment document can be found on the government’s gender pay gap website, and further information can be found in the report, “Trailblazing Transparency,” coauthored between the government and Deloitte (one of the few companies to have voluntarily disclosed gender pay gap figures), was published just before the draft regulations were announced. The report sets out: “what closing the gender pay gap really means; how businesses can benefit; the importance of transparency in driving progress and successful action employers are taking.”

In addition, the Women and Equalities Select Committee is conducting research into whether further action needs to be taken by the government. The committee’s key focus has been on older women in the workforce. Says Naylor: “When research looked at the pay gap at the beginning of people’s careers, it was found to be either very small or non-existent, but as women age it widens, especially in the 40-plus age period.” It is not known whether the committee will recommend further changes to U.K. family laws.

SALARIES: MEN VS WOMEN

The following chart illustrates the distribution of men and women’s earnings in the U.K. 2015.


Source: ONS Annual Survey of Hours and Earnings 2015

“Going forward,” says Naylor, “the main concern is compliance. Our clients don’t want to fall foul of the regulations so they need to understand exactly what is required in order to put systems in place so that the statistics can be generated.”

The gender pay gap statistics must also be uploaded to a government website. This is intended to allow the government not only to track compliance but also to provide a central source of statistics. The U.K. press has dubbed these “league tables” because the statistics can be looked at not just by industry sector but also company by company. Naylor adds that there were industry concerns about the so-called league tables not because they could reflect poorly on a company but because they don’t give a full picture of the situation and, more importantly, are not reflective of what companies might actually be doing.

“Companies could rank low in the tables,” says Naylor, “but in some cases they already recognise there is a problem and are addressing the issue. That would, in fact, make the company a good place to work.”

Companies can publish an accompanying narrative to the statistics. Naylor says that it is inevitable that companies will want to provide such a narrative, except if the pay gap is very small or non-existent, then figures will speak for themselves. Initially, during the previous consultation, the government wanted to know if an accompanying narrative should be mandatory but it was decided that this was too prescriptive.

The government is to issue guidance on the regulations, which will include guidance on what people should include in the narrative, in late summer/early autumn this year.