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Pay Gap Reporting

Background and Compliance

It is anticipated the Equality Act (Gender Pay Gap Information) Regulations 2016 will be approved this month, meaning they will come into effect in April 2017.  As previously identified in our blog, the 2016 Regulations will only apply to employers who have 250 or more ‘relevant employees’.

It should be noted, however, that certain public bodies in Scotland, have had to publish pay gap (and other ‘equal pay’) information since 2013.  This is due to the existence of devolved powers, within this sector, and the relevant reporting requirements are contained within The Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012.  Amendments have subsequently been made to these 2012 Regulations, which have extended the public bodies caught and also lowered the reporting threshold to just 20 employees.  Other recent amendments have included a requirement for such bodies to publish the gender composition of their boards and to include succession plans for increased diversity.

The 2016 ‘UK’ Regulations do not, therefore, apply to public sector bodies in Scotland but are very much coming into focus in respect of the UK private sector.  There has been a separate consultation process by the UK Government for new regulations to cover public sector bodies in England, which is intended to replicate the 2016 regulations (but for the English public sector).  However, those are beyond the scope of this blog.

For those private sector Scottish employers (or any relevant English employer), the term ‘relevant employee’ will encompass those working in the UK and will likely include casual and zero hours staff too.  It is also likely to encompass self-employed individuals, who cannot/do not send substitutes, which therefore has implications for employers in the so called ‘gig economy’.

Such employers will have to publish their gender pay gap information on their own website and must retain the information online for three years.  They will also need to calculate and publish three other types of figures; gender bonus gap, proportion of men and women receiving a bonus and the proportion of men and women in each quarter segment of their pay distribution.  The information will need to be presented in an accessible manner to employees/the public and also uploaded to a government sponsored website.  A written statement will also be required confirming the gender pay gap information is accurate, which will have to be signed be a senior employee.

There will be flexibility as regards when such information must be published, with this allowed to be done at any-time up until April each year.  The last date for publishing the first round of information therefore looks set to be 29 April 2018.  The government has committed to publishing guidance for employers, on some of the finer details of (for example) what is meant by ‘pay’ and the method of overall calculation. 

Enforcement & Comment

A formal civil enforcement regime does not seem likely but a number of alternative measures may, ultimately, make their way into the Regulations.  It is thought this might include periodic checks being run on employers to try to ensure compliance.  Other suggestions include highlighting employers who publish particularly full information, which can include voluntary narratives.  It may also be that those found not to have complied will have their names published as a deterrent.          

While there is ongoing debate as to the exact level of gender pay disparity (as well as some of its causes) it is clear that a persistent gap does exists.  Employers will be best advised to consider whether or not they are likely to be caught by this legislation, with the first annual reporting cycle likely to commence in April next year.  While the Government seems to have no appetite for a civil enforcement regime, businesses failing to comply may (ultimately) find themselves named and shamed.  In any case, given the information will be freely available on websites, it will not be difficult for interested parties (including journalists or aggrieved employees) to expose any failures, or gaps, with potential negative publicity to follow. 

As with popular schemes such as the ‘real living wage’, this could be an opportunity for employers (of all sizes) to be seen to be tackling any issues they may have and perhaps even gaining some positive publicity from it.  This may be of particular appeal to some employers given  that  recent research shows that graduates, and other young workers, are putting more store in ethical and equality issues when deciding whom to pursue careers with.  Early calculation and analysis of the figures, in conjunction with appropriate advice, will be a good way of seeing where the business stands and what gaps might be bridged.  It also might flag up any risk factors in the context of potential equal pay claims, particularly where gaps exist and where functions are of a similar nature.

Equal Pay Case Update

While gender pay reporting is concerned with differences in the average pay between men and women (over time), irrespective of their role, equal pay law is concerned with pay differences between men and women carrying out the same or similar roles. 

With this in mind, there has been a recent preliminary ruling in the equal pay claim of Brierley & Others V Asda Stores Ltd.  While there have been significant numbers of public sector equal pay claims in recent years, there have been relatively few actions in the private sector.  The Employment Tribunal, in this case, has determined that women who work in Asda stores can compare themselves to men who work in Asda’s distribution centres (who receive higher pay).  Given the Claimant’s number 7,000, it is of potentially huge significance to that business and the employees concerned.    

However, it should be borne in mind that the ruling does not address the crucial questions of whether the store workers are doing work of ‘equal value’ to the depot workers and, if so, whether Asda can establish a ‘material factor’ defence to the pay differences.  Those questions will have to await a full hearing, though it seems likely that Asda will appeal the preliminary ruling. 

Many commentators consider there may be other companies who could face similar potential exposure and equal pay audits are a useful way of flagging up such risks.  It is only by taking appropriate legal advice, that such equal pay information can be compiled (with the protection of legal privilege), and then assessed against the statutory tests.  With the introduction of gender pay gap reporting across the private sector in the UK, a failure to act now may ultimately prove costly because employees, who consider they have a claim, may use such information to seek their own professional advice.

If you have any queries in relation to the above please get in touch with a member of the Stronachs Employment Team.                                  

Euan Smith, Associate


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