By Kendall Burnett and Sarah Gadd
There is mixed opinion on the UK’s forthcoming gender pay reporting regime. Whether the new reporting obligations will help eradicate the UK gender pay gap (reported by the Office of National Statistics to be 19.2% in 2015) or fuel an increase in equal pay discrimination claims in the private sector remains to be seen. The changes are part of the government’s drive to tackle gender inequality, including its pledge to increase the representation of women on all FTSE 350 boards to 33% by 2020.
The UK is not the first EU country to introduce mandatory gender pay reporting. In France, large employers are required to factor gender pay equality into their annual collective bargaining negotiations, and can be required to implement a gender pay gap action plan. Non- compliant companies can be fined up to 1% of their total wage bill, and may also be subject to civil, and in rare circumstances, criminal sanctions if a gender pay gap exists that the company cannot objectively justify. However, the Nordic countries are the leaders in this area with Iceland, Norway, Finland and Sweden grabbing the top spots in The Global Gender Gap Report produced by the World Economic Forum in 2015. Whether these countries’ successful narrowing of the pay gap comes down to mandatory reporting or other cultural factors is difficult to tell.
If the regulations are implemented in October 2016 as expected, employers of 250+ UK employees will be required to take a “snapshot” of gender pay data on 30 April 2017, and will then have 12 months to report the data on their website. Their report must include the difference in the mean and median pay of male and female employees (including bonus pay) as well as the number of male and female employees working in each “quartile” of the pay scale. This last requirement is likely to be the most problematic for employers in industries where men hold more senior positions (and therefore higher paid roles and where more men than women have roles in certain parts of the organisation and where there is a pay disparity). Disclosing more information than legally required may ultimately prove better, to provide explanatory context and hopefully diffuse potential claims and questions around gender pay gaps.
Criticising the regulations as toothless is easy as there are currently no legal penalties for non-compliance; however, the government will monitor levels of compliance during the first few years of implementation. In addition, employers will be required to link their published information to a government sponsored website and the government may well “name and shame” non-compliant employers. Therefore, at present, negative publicity associated with any significant gender pay gaps being revealed (or refusal to report) will likely be most damaging, together with the increase in equal pay claims in the private sector that we predict will occur.
Organisations should start reviewing processes in place to collect data, and conduct a mock gender pay review to identify (and rectify) any potentially damaging gender pay gaps before the requirement to report arises in 2018.
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