UK Gender Pay Gap Reporting Rules Come into Effect

UK Gender Pay Gap Reporting Rules Come into Effect

New regulations announced last year in the UK to require organizations with 250 employees or more to publish any gender discrepancies in their payrolls became effective on Thursday. While employers are not required to publish these figures for the first time until a year from now, the regulation requires them to base their on a “snapshot” of pay data based on the year leading up to April 5, as the law firm Simmons & Simmons explains in a comprehensive overview of the regulations. Of course, answering the question of which employers and employees are covered by the rule, and what data employers are obligated to collect, is not entirely straightforward:

Those employed under a contract personally to do work would be included where the employer has the data needed to carry out the calculations, which may be the case for example where a project initiation document exists and/or a schedule of fees. Where the employer does not hold the data, they should consider whether it is reasonably practicable to obtain it, for example by asking the person so employed. New contracts should seek, where possible, to ensure that those employed under a contract personally to do work are required to provide the information needed for compliance.

Agency workers will form part of the headcount of the agency that provides them, and not the employer they are on assignment to. Similarly any individual who is employed by their own service company, which, in turn, contracts to provide a service to an employer would be caught by the headcount of employees for the service company if it employs 250 or more employees, not by the end user. Each part time worker will count as one employee for gender pay reporting purposes. If an employer uses job-share arrangements then every employee within a job-share counts as one employee each.

Alison Woods and Paul Graham, attorneys at CMS Cameron McKenna, answer some of employers’ most likely questions about the rules at SHRM:

We run our payroll at the end of April. How do you deal with new joiners and leavers between the snapshot date and the end of the month? The snapshot date is significant as this is the day when you assess the number of relevant employees for the purposes of the 250 threshold and the employees to include in your calculations. That means if someone joins on 6th April they should not be included in this year’s report. Likewise those who leave before 5th April but receive pay in April should not be included.

We have less than 250 employees but if we include partners this takes us over the 250 requirement. Are we caught by the Regulations? Technically on a literal interpretation of the Regulations partners may be included in the threshold figure since the trigger is whether an employer has 250 employees on the snapshot date (as opposed to 250 relevant employees). However, partners are certainly excluded in relation to any of the pay reporting obligations because they are specifically excluded from the definition of “relevant employee.”

The new regulations are meant to give employers a nudge toward correcting gender pay gaps with the prospect of being “named and shamed,” but they do not create any new civil penalties for enforcement. While the government could still create such penalties in the future, Women and Equalities Minister Justine Greening told the Financial Times that they would rather “work in partnership” with companies and “win over hearts and minds.”

The absence of an enforcement mechanism is one reason why some critics doubt that the rules will make a big impact on gender equality. Another reason is that the data companies will be required to publish may not be granular enough to uncover instances of genuine pay discrimination, as Suzanne Horne, an employment law partner at Paul Hastings, points out to the Independent:

As it stands, the reporting won’t reveal whether men and women are paid equally for doing the same or comparable jobs. It will simply show the mean and median difference in pay and bonus remuneration across a particular company. … The reporting will tell us what we already know, whilst neglecting to consider the myriad of factors that legitimately differentiate pay such as levels of responsibility, nature of work, experience and geographical location to name but a few[.]

Advocates for more stringent regulations want to see more detailed data as well:

Sophie Walker, leader of the Women’s Equality Party … said that the new rules coming into effect “will not be enough to close the gender pay gap” and that her party would require companies to publish pay data broken down by age, ethnicity and disability, in addition to gender. Ms Walker said that her party would also extend this to businesses with more than 50 employees within three years.

Claire Tracey, a partner and managing director at the Boston Consulting Group, writes at People Management that UK employers who want to create a more inclusive workplace for women should also focus on another gender gap—namely, in employee engagement:

Our recent report, The Rewards of an Engaged Female Workforce, found a noticeable gender difference in engagement is present in companies with a low overall engagement level, and that it increases with seniority. Meanwhile, companies with strong engagement had no gap between genders. When a company gets engagement right, the whole workforce benefits substantially – as does business performance. …

[Our] report found that senior women who were less engaged were being let down when it came to appreciation – feeling like their opinions counted and they could influence decision-making; mentorship and sponsorship; and promotion prospects. Compensation, relationships with colleagues and managers, work-life balance and company ethos also played important roles in shaping how engaged women felt.