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16 Jul 2015

Employment

Firms will soon be forced to reveal gender pay gap

New regulations will soon require private and voluntary sectors in the UK with at least 250 employees to publish information about the pay of their male and female employees.

Background:

The Prime Minister David Cameron has declared that action is needed to close Britain’s pay gap between men and women. Here in the UK, the gender pay gap is the sixth highest among European Union nations and, overall, a woman earns just 80p for every £1 earned by a man.

The Government will soon legislate under S.78 of the Equality Act 2010 (the “Equality Act”) to require companies with 250 or more employees to publish gender pay gap information.

‘Employees’ for this purpose is defined as in the Equality Act, i.e. anyone employed under a contract of employment or apprenticeship or under any contract personally to do work.

What information will employers have to publish?

The precise details of these new measures are the subject of the current consultation, which is due to conclude on 6 September 2015. This consultation asks whether the information should be the overall difference between the average earnings of men and women as a percentage of men’s earnings, or whether it should be broken down by full-time and part-time employees, or by grade or job type. It also asks whether employers should be required to provide additional information explaining any pay gaps/discrepancies and asks how often employers should be required to publish such information.

How will these new regulations impact employers?

The introduction of mandatory gender pay gap reporting is a positive step for diversity and should lead to increased transparency. However, carrying out a disclosable equal pay review and publishing an adverse gender pay gap could have a number of implications for companies including:

  • Reputational damage and negative publicity;
  • Disclosure of sensitive financial data;
  • Impact on employee attraction, engagement and retention;
  • Risk of significant financial damage resulting from employee claims for equal pay potentially going back over six years;
  • Adverse impact on procurement process.

The proposed penalty for non-compliance with the new measures is a fine of up to £5,000. However, the associated negative publicity and employment relations risks would likely be far more damaging.

What do the critics say?

The Confederation of British Industry, which represents employers, warned that publishing the gap in pay between men and women could be “misleading.” They argue that the fundamental reason for the gap in pay between men and women is “stereotypes” which deter women from pursuing higher earning careers: “To see real progress […] we need to challenge occupational stereotypes by encouraging more women into male dominated industries and investing in careers advice.”

Conclusion:

The new regulations will be introduced within the next year and are likely to require companies to publish their gender pay gap within the following 12 months. The consultation paper suggests that companies with over 500 employees may be required to publish their pay gap before smaller employers. Therefore, companies may have up to two years to investigate and improve any gender pay gaps before disclosure is required.

HardingEvans can support Employers identify whether they may have cause for concern by undertaking an Equal Pay Audit to identify issues of risk and how these may be best addressed.

 

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