When passed, the new obligations will come into force in April 2017. What has changed in this latest draft and what should employers look out for?
As a reminder the Gender Pay Gap Regulations (the ‘Regulations’) require employers in the private and voluntary sectors with more than 250 ‘relevant employees’ to publish on an annual basis key information relating to the difference in hourly pay and bonuses between men and women.
What are the key changes to the latest draft Regulations as compared to those published in February 2016?
Timeline: The date for the Regulations coming into force has been brought forward from 30 April 2017 to 6 April 2017. This means that the first Gender Pay Gap (GPG) report must be published by 4 April 2018 based on hourly pay data as at 5 April 2017 and bonus data from the preceding year and the snapshot date for employers will be 5 April each year going forwards. So, 5 April 2017 will be the first “snap shot” – put this date in the diary now!
Definition of employee: Back in February "employees" were defined as being those who ordinarily work in Great Britain and whose contracts of employment are governed by UK legislation however this is not contained in the revised Regulations. The Explanatory Note accompanying these new Regulations states that the definition of ‘employment’ will be that used in s83 Equality Act 2010 which includes ‘employment under a contract of employment, a contract of apprenticeship or a contract personally to do work’. Depending on the nature of the worker's contract, this could include self-employed contractors who are not on the employer's payroll system. However, the Regulations now provide that there is no obligation to include pay data relating to individuals engaged under a contract personally to do work if the employer does not have such data and it is not reasonably practicable to obtain it.
Calculation of hourly pay: A helpful amendment in the latest Regulations is that when calculating hourly pay (for the purposes of the mean and median pay gap and quartile proportions), employers should refer only to "full-pay relevant employees" and not those paid at a reduced or nil rate as a result of being on annual leave, maternity, paternity, adoption or shared parental leave, sick leave and/or special leave who are excluded. This means the report is less likely to be skewed; for example, if an employer has a large number of employees on maternity leave. These employees are however not excluded from the bonus pay calculations.
Distinction between ‘Ordinary’ and ‘Bonus’ pay: The government has now included separate definitions for ‘Ordinary’ and ‘Bonus’ pay. Ordinary pay comprises of basic pay, allowances, paid leave, shift premium pay and pay for piecework. Bonus pay includes money, vouchers, securities, securities options or interests and securities.
Sanctions and enforcement: There are no enforcement measures in the Regulations themselves. However, the Explanatory Note to the Regulations now states that a failure to comply with an obligation imposed constitutes an ‘unlawful act’ which empowers the Equality and Human Rights Commission to take enforcement action. The Regulations do not specify what penalties or enforcement action would apply but it could include an investigation into employers who fail to publish a report.
Next steps: Employers need to make sure they are ready to report on their gender pay gap by 4 April 2018. What actions can you start taking to ensure you are ready?
- Conduct a trial run before April 2017 – know where the risk areas will be, can you address them now? 5 April 2017 is not too far away, so do the due diligence now.
- Assess which individuals fall within the scope of the new rules
- Work out how to exclude individuals not in receipt of full pay
- Assess bonus pay and how to include it
- Understand what is and is not “ordinary pay”
- Consider what your organisation’s internal sign off and approval processes will be
- Think about whether you communicate the report to employees separately and who will deal with any issues raised
- Consider any accompanying narrative to the report which might provide additional context to discrepancies.
These new rules will undoubtedly prove to be a big shift in the culture of pay and earnings which have traditionally been a private matter for organisations and individuals alike.
To discuss how these rules may affect your organisation or help in implementation please contact the Employment Group on 0118 952 7284 or at [email protected].
For further information about the new Regulations please look out for our Webinar programme which includes legislation updates. For advice on training – particularly on equality, diversity and pay – please contact our Employment and HR Training Team on [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.