February 7, 2017

Gender pay gap reporting – Government guidance

The Government and Acas have issued draft guidance to assist employers with gender pay gap reporting. The guidance provides practical advice on how to carry out gender pay gap reports, clarification of some of the key provisions in the regulations, and "essential considerations" on how employers can reduce the gender pay gap.

The snapshot date for collecting data is 5 April 2017, and the first deadline for publishing gender pay gap reports is 4 April 2018.

What does the guidance say?

'Headcount' of 250 or more employees

Although the gender pay rules only apply to employers for any year that they have a headcount of at least 250 employees on 5 April, the guidance encourages employers with fewer than 250 employees to seriously consider the business benefits of complying with the gender pay rules.

The definition of employees for gender pay reporting purposes includes employees, workers (including workers on zero hours contracts, and other casual workers) and some contractors but excludes partners.

Contractors (under a contract personally to do work)

Some contractors will come within the scope of gender pay reporting, and be included in the 250 headcount – principally those who are employed under a contract to perform work personally where they cannot subcontract the work or employ their staff to do it.

However, given that it may be difficult for employers to report on pay for contractors, these individuals do not have to be included in the calculations if it is not 'reasonably practicable' for them to obtain the relevant information. The guidance says that if the employer does not have the data in a schedule of fees or a project initiation document, for example, it would be 'reasonably practicable' for them to obtain the information by asking the contractor for it.

The guidance also recommends that where possible, new contracts with self-employed individuals should seek to require them to provide the information for gender pay reporting.

Partners

The guidance confirms that the regulations exclude partners in traditional partnerships and limited liability partnerships from the definition of employment, because partners aren't "paid" but instead take a share of the profits.  However, from a strict reading of the final draft regulations it is arguable that partners should be included for the purposes of working out whether the employer exceeds the 250 headcount.  In view of the wording in the guidance, this is likely to be a drafting error and may be corrected before the regulations are passed. It is clear though, that partners' pay is not included in the reportable statistics.

Overseas workers and multinational organisations

The definition of employees is not restricted to those individuals who ordinarily work in, or to employers based in, Great Britain.

Employers in Great Britain with employees working overseas and multinational organisations with employees working wholly or partly in Great Britain should consider on an individual basis whether those employees have a sufficiently strong connection with Great Britain. Indications they do have a strong connection, include:

  • their contract is subject to UK legislation
  • they continue to have their home in Great Britain, and
  • UK tax rules apply to their employment

If they do have such a connection, they must be included in the 250 headcount and their pay etc must be included in the reportable statistics.

Group companies

The guidance does not provide any clarification on how group companies are treated. So it seems that each company in a group must be treated as a separate entity, and the obligation on any of the companies forming part of the group to prepare a gender pay report will only be triggered if they employ at least 250 employees individually.

That said, group companies may still decide to provide gender pay information for reputational reasons, particularly if other employers in the same sector are reporting on a group-wide basis.

Gender identity

The guidance stresses that employers should be sensitive to how employees choose to identify themselves in terms of their gender. If an employee does not self-identify as either gender, they can be omitted from gender pay reports, but presumably not the 250 headcount.

Employees working irregular hours

When calculating 'hourly pay', some employers may find that it will be necessary to vary the length of the 'pay period' for different categories of employees. Although typically the pay period will be a week, a fortnight or a month, depending on how irregular the employees' hours are, this may have to be extended for up to a year.

Pensions

Both employer and employee pension contributions are excluded from gender pay calculations. This is the case for both pay and bonus calculations. So if an employee uses some, or all, of their bonus to make a pension contribution, this should not be included in the calculations.

Bonuses

When calculating the gender pay difference between mean and median bonus pay, bonuses received in the relevant 12 month 'bonus pay period' must be included in the calculations. It is the date a bonus payment is received, not the period for which the bonus is attributed, that is relevant.

So it seems that any deferred elements of a cash bonus award will only be included in the calculations in the bonus pay period that the amount gives rise to a charge to income tax.

Reducing the gender pay gap

The advice in the guidance on steps employers can take to reduce their gender pay gap includes:

  • effective monitoring of differences in the recruitment balance, starting salaries, promotions, and flexible working requests across all job types and levels of seniority, etc.
  • managing family friendly leave successfully by encouraging men to consider taking shared parental leave and considering whethermaternity, adoption, paternity and shared parental pay should be given comparable financial value
  • ensuring that promotions, especially for senior roles, can function with flexible working arrangements in place
  • ensuring that the organisation's structure and processes enable talented employees of both gender to progress

What do you need to do now?

Organisations which have already carried out a mock pay audit should consider the extent to which the guidance impacts on your gender pay gap data.  Companies may also wish to assess whether they have effective gender monitoring in place, for example data which shows recruitment proportions of men and women, the number of men and women who apply for promotion and the number who are successful, etc.

Click here for the draft guidance

See our December update for information on the final gender pay regulations here.

Click here for the draft final regulations.

For information on the rules, and support we can provide by taking you through the gender pay audit process and the benefits for your business, click here.

Key dates

Early 2017 – The new gender pay gap regulations for companies with at least 250 employees have received parliamentary approval and are awaiting sign off by ministers.

From 6 April 2017 - Start collecting and calculating the first tranche of gender pay data for your organisation. Consider whether to provide any additional information or an explanation of the data to put your findings into context, and also consider how to present the information and when would be the best time to publish it.

On or before 4 April 2018 - Publish the first gender pay gap report .