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Farrer & Co | Gender Pay Gap reporting – it’s not gone away

Equal pay has been in the news a lot recently: there was the BBC "who's on the list" scandal (see here for Katie Lancaster's take on that); Asda's court battle against over 10,000 claimants; and last week's report by the Chartered Management Institute that the pay gap between male and female managers is worsening and could be as much as £12,000 per year.

All of this got me thinking about gender pay gap reporting. There was a lot said about it when the gender pay gap regulations came into force in April this year (we even did a blog piece on it), but since then things have gone relatively quiet. Employers shouldn't be fooled into thinking it's gone away though. Not only is the deadline for reporting just over six months from now, on 4 April 2018, it turns out that quietly, over the last five months, 115 diligent companies have already published their data online. This can be found on the Government's website – here – and I thought it would be interesting to take a quick peek...

The story so far

Not being a statistician, I'm not able to give you a full blown analysis of the figures provided, but here are a few bits which I found interesting:

  • Estimates suggest that around 9,000 companies will be required to report gender pay gap data. That means just over 1% of companies have reported so far. There is clearly still a really long way to go.
  • Perhaps not surprising, given current headlines, the overall figures show that women are on average paid less than men – the current mean pay gap is 11.4% and mediun pay gap is 9%. Interestingly, this is actually lower than figures published by the Office of National Statistics in 2016 which gave the gap for all employees as being 18.1%.
  • As you might expect, the figures fluctuate wildly between different organisations – with some gaps as large as 38% and others amazingly at 0% (hats off to those select few who managed that). Other organisations pay women more than men (one – significantly in education – shows that their women's median pay as 80% higher than men!). It just goes to show that taking a national average of something can be pretty misleading.
  • The gap between average bonus payments show that women are, again, paid less than men by a mean of 12.6% or a mediun of 5%. However, take out those organisations who don't appear to pay bonuses, and this goes up to 20% plus.
  • Again, not surprisingly, the data on number of men and women in different pay quartiles, puts more women in the lower pay band (53%) and less in the upper pay band (39%).
  • Finally, the most interesting thing I found is the number of organisations (especially those showing pay gaps) who have published a narrative to accompany their pay gap data.
  • Deloitte for example (which shows a mean pay gap of 18% and a mean bonus gap of 51%), explains that the gap is because women hold fewer senior positions than men in the firm. If this is adjusted for in the figures, the pay gap apparently drops to 2.5%. The report goes on to outline its action plan to address this issue.
  • Virgin Money (which show a mean pay gap of 33% and a mean bonus gap of 45%), explains that its pay gap has reduced by 32.5% since it voluntarily published its figures in 2016.

It feels to me that it is this commentary, and the thought put into it by organisations, that makes for the most illuminating reading of all.

It's worth noting that these figures show a snapshot as at 11 October 2017. As more data trickles in, the numbers will no doubt shift and I for one will watch with interest to see what the headlines are in April 2018.

What needs to be published?

If you are part of the majority of companies who have not yet published your gender pay gap data, don't panic, you've still got seven months in which to do so.

As a quick reminder, public sector employers with 250 employees or more on 5 April each year (from 2017) will be required to publish the following gender pay gap information for employees:

1. The difference in mean pay (as a %) calculated on 5 April using the gross hourly rate of pay (see below);

2. The difference in median pay calculated as above;

3. The difference in mean and median bonus pay during the 12 months leading up to 5 April;

4. The proportion of men and women who received bonus pay during the 12 months preceding 5 April; and

5. The number of male and female employees in each quartile of the pay range.

As you might expect, there are specific regulations on the definitions of an employee, pay and bonuses, as well as how to calculate things like gross hourly rate, which we are happy to help with if required.

What should you consider between now and April?

So if you're part of the majority, what should you be doing? Here are our suggestions for some of the things you should be considering:

  • Calculate the number of employees, and if a group structure with more than one employer, how many employees are employed by each entity. As a snapshot of employees is taken each year, you may be just outside the scope of the regime one year, but if for example you are expanding, it may fall within the regime the next year.
  • For group structures, consider whether separate pay gap reports will need to be produced.
  • Check whether your HR software/payroll provider can calculate pay with all the elements required, and remove those that should be excluded.
  • Stress test salary quartiles to establish how men and women fit into the bands using current pay scales.
  • Consider the remuneration package offered, all benefits, and any flexible benefits scheme, and analyse which elements would be reportable under the Regulations.
  • Consider tactically whether you want to conduct a preliminary audit or fact finding exercise subject to legal advice privilege to uncover any potential exposure.
  • Carry out an audit of any bonus schemes offered and identify which would need to be reported as bonus pay under the Regulations.
  • Calculate the gender pay gap information using the methodology of the draft Regulations and consider whether external consultants should be instructed to prepare the draft information.
  • Identify who will sign the written statement confirming the accuracy of the published information and ensure this person is familiar with the Regulations, and happy to be involved.
  • Involve all necessary stakeholders to put together short, medium and long-term plans to reduce any pay gap.
  • Establish the reasons for pay differentials, and prepare to provide voluntary contextual information to explain these (they may be non-gender related). Plan and take control of how any gaps will be communicated both internally and externally.

Although you'll be pleased to hear that, in our view, the new regime is unlikely to result in a proliferation of equal pay claims (because the publishing requirements are based on the gross hourly rates for men and women without a comparison of equal work), if a large gender pay differential is revealed in your organisation, at the very least it could encourage employees to ask some pretty difficult questions, and that is something we would certainly recommend you prepare for in advance.

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