gender pay
  • Insights

Get ready for the return of gender pay gap reporting in the UK: top tips for employers

Written by
Lewis Silkin, widely recognised as the UK’s leading specialist employment law practice.
Authors
Jonathan Carr
Partner - United Kingdom
Lewis Silkin
United Kingdom
04.12.20
6
The obligation on employers in the UK with 250 or more employees to report their last set of gender pay gap statistics was suspended on account of COVID-19, but the next round of reporting is just around the corner. This article provides tips on how best to prepare for it.

The one-off reprieve applied to gender pay gaps relating to data from 5 April 2019, which had been due to be reported within a year from that date. The regime is now re-starting again and by 5 April 2021 employers must report their gender pay gaps calculated using data from 5 April 2020.

Here are our five top tips to prepare:

Make sure you are clear how furlough will affect your calculations

The Gender Pay Gap Information Regulations, enacted in 2017, require employers to omit from their pay-gap calculations any employees who were on reduced rates of pay on the 5 April ‘snapshot’ date. In view of the position last April, this could constitute a significant proportion of the workforce. Take-up of the government’s furlough scheme was widespread, but it only covered up to 80% of pay. In addition, many employees who were unwell or self-isolating may have been on reduced company sick pay or statutory sick pay on the relevant date.

This means that April 2020 is likely to be a highly unrepresentative pay month for many employers. Since gender pay gaps are calculated from averages, the pool of people to be included could be dramatically smaller. For example, a football club which furloughed most of its events, sales and marketing teams may find their pool of employees to be included in the reportable figures is much narrower than usual.

This might mean gender pay gaps are skewed significantly from previous years and may fail to give a meaningful picture. This will require careful explanation in the report, especially where it otherwise may suggest your gender pay imbalance is getting worse rather than better.

Check your headcount

The obligation to report applies to employers with more than 250 employees on the snapshot date (5 April 2020). Since it will be two years since many employers last reported, it is important to check whether your organisation is obliged to report this time round or not. Employers who were under (but close to) the threshold in 2018 may now be over it. Some organisations may have made significant numbers of redundancies as a result of COVID-19 and may have less than 250 employees now but what counts is whether they had 250 or more on 5 April 2020.

Get ahead of the game….

Last month, the Labour MP Stella Creasy introduced a Bill that would widen pay gap reporting requirements. The Bill has some cross-party support but at the moment, crucially, it lacks Government support. Without that, it is very unlikely to become law. That said, the Government has committed to undertake a review of gender pay gap reporting in 2022. Depending upon the result of that review, we may see elements of the current Bill incorporated into future reform proposals. The aims of the bill are essentially to:

  • Expand the scope of reporting obligations so that employers with 100 or more employees (rather than 250 or more) would be required to report their gender pay gap statistics.
  • Introduce ethnicity pay reporting for organisations with 100 or more employees.
  • Create an obligation for employers to publish a plan to reduce or remove any pay gaps. Currently, employers must only publish their gender pay gap statistics without any specific requirement to make efforts to remedy inequalities.
  • Amend equal pay law to include a ‘right to know’ what colleagues are paid (allowing women to request pay data relating to a male colleague if they think there might be a difference in pay) and removing the time limit on being able to claim arrears of pay.

 

So what should employers do? Although this is all still some way off becoming a legal requirement, given the current focus on racial equality and racism within sport, organisations may wish to start thinking anyway about how they might begin to collate data on racial pay differences and how any imbalances might be addressed to show their commitment to change.

If you haven’t made headway reducing or eliminating any gender pay imbalances, you need to re-double your efforts. It is clear the pressure to improve is only going to increase in the coming years. Pay gaps, rather like super-tankers, take a long time to turn round. COVID-19 related excuses will not be accepted for long.

Calculate your figures carefully and report them accurately

Sample analysis we have conducted in previous years on publicly reported pay gap figures showed a number which were plainly wrong and not mathematically possible. That not only undermines the credibility of the report but also the organisation’s commitment to diversity in general. The rules were complex before and just became a whole lot more complicated to operate because of the furlough distortions and other anomalies of 2020.

Start now

A rethink of employers’ reporting obligations in respect of April 2020 data would be welcome in the current circumstances but as yet there has been no sign that the Government will be minded to do so. Employers therefore need to assume it will go ahead and start preparing now. Although the April reporting deadline is still a few months away, collating the information and producing a high-quality report does take time. It’s important not to put it off to the last minute not least as the deadline will coincide with other time-consuming challenges like the delayed implementation of IR35. If your statistics are less than flattering then finding that out now also gives you time to start implementing measures on which a more positive reporting narrative can then be based.

Here are our five top tips to prepare:

Make sure you are clear how furlough will affect your calculations

The Gender Pay Gap Information Regulations, enacted in 2017, require employers to omit from their pay-gap calculations any employees who were on reduced rates of pay on the 5 April ‘snapshot’ date. In view of the position last April, this could constitute a significant proportion of the workforce. Take-up of the government’s furlough scheme was widespread, but it only covered up to 80% of pay. In addition, many employees who were unwell or self-isolating may have been on reduced company sick pay or statutory sick pay on the relevant date.

This means that April 2020 is likely to be a highly unrepresentative pay month for many employers. Since gender pay gaps are calculated from averages, the pool of people to be included could be dramatically smaller. For example, a football club which furloughed most of its events, sales and marketing teams may find their pool of employees to be included in the reportable figures is much narrower than usual.

This might mean gender pay gaps are skewed significantly from previous years and may fail to give a meaningful picture. This will require careful explanation in the report, especially where it otherwise may suggest your gender pay imbalance is getting worse rather than better.

Check your headcount

The obligation to report applies to employers with more than 250 employees on the snapshot date (5 April 2020). Since it will be two years since many employers last reported, it is important to check whether your organisation is obliged to report this time round or not. Employers who were under (but close to) the threshold in 2018 may now be over it. Some organisations may have made significant numbers of redundancies as a result of COVID-19 and may have less than 250 employees now but what counts is whether they had 250 or more on 5 April 2020.

Get ahead of the game….

Last month, the Labour MP Stella Creasy introduced a Bill that would widen pay gap reporting requirements. The Bill has some cross-party support but at the moment, crucially, it lacks Government support. Without that, it is very unlikely to become law. That said, the Government has committed to undertake a review of gender pay gap reporting in 2022. Depending upon the result of that review, we may see elements of the current Bill incorporated into future reform proposals. The aims of the bill are essentially to:

  • Expand the scope of reporting obligations so that employers with 100 or more employees (rather than 250 or more) would be required to report their gender pay gap statistics.
  • Introduce ethnicity pay reporting for organisations with 100 or more employees.
  • Create an obligation for employers to publish a plan to reduce or remove any pay gaps. Currently, employers must only publish their gender pay gap statistics without any specific requirement to make efforts to remedy inequalities.
  • Amend equal pay law to include a ‘right to know’ what colleagues are paid (allowing women to request pay data relating to a male colleague if they think there might be a difference in pay) and removing the time limit on being able to claim arrears of pay.

 

So what should employers do? Although this is all still some way off becoming a legal requirement, given the current focus on racial equality and racism within sport, organisations may wish to start thinking anyway about how they might begin to collate data on racial pay differences and how any imbalances might be addressed to show their commitment to change.

If you haven’t made headway reducing or eliminating any gender pay imbalances, you need to re-double your efforts. It is clear the pressure to improve is only going to increase in the coming years. Pay gaps, rather like super-tankers, take a long time to turn round. COVID-19 related excuses will not be accepted for long.

Calculate your figures carefully and report them accurately

Sample analysis we have conducted in previous years on publicly reported pay gap figures showed a number which were plainly wrong and not mathematically possible. That not only undermines the credibility of the report but also the organisation’s commitment to diversity in general. The rules were complex before and just became a whole lot more complicated to operate because of the furlough distortions and other anomalies of 2020.

Start now

A rethink of employers’ reporting obligations in respect of April 2020 data would be welcome in the current circumstances but as yet there has been no sign that the Government will be minded to do so. Employers therefore need to assume it will go ahead and start preparing now. Although the April reporting deadline is still a few months away, collating the information and producing a high-quality report does take time. It’s important not to put it off to the last minute not least as the deadline will coincide with other time-consuming challenges like the delayed implementation of IR35. If your statistics are less than flattering then finding that out now also gives you time to start implementing measures on which a more positive reporting narrative can then be based.