Gender pay gap reporting – so what now?
We’re six months on from the first deadline for gender pay gap reporting for businesses with more than 250 employees. The reporting process was introduced by the government in a bid to understand why differences in pay exist and identify ways to reduce the gap.
Whilst the resulting reports served to highlight the extent of the differences, many employers were quick to defend their pay gaps, stating that comparing salaries of different jobs created an unrealistic view of the gap within their business.
So what’s next for pay gap reporting?
Despite the potential pitfalls associated with the data, gender pay gap reporting isn’t going away – it is now an annual commitment for large businesses and some public sector organisations.
The ONS has subsequently reported that the pay gap itself has reduced to a low of 17.9% in 2018, so clearly the UK is heading in the right direction. However, the TUC has claimed that at the current rate of closure, it would take half a century to reach parity for men and women. Clearly, there’s still work to do.
One option is to extend the requirements for who has to report their gender pay gap to include smaller businesses. The BEIS Committee published a report in August which called on the government to require businesses with more than 50 employees to reveal their pay gaps. Alongside this, they argue that the reporting requirements should force companies to publish their plans for reducing their pay gap.
Alongside this, from January 2019, new legislation comes into force requiring large businesses to publish the pay ratio between their CEO and ‘average’ employee. This will then extend further in 2020 to include executive pay ratios.
What does this mean?
When all these measures are combined we begin to see the picture that pay gap reporting will not be limited to the gender pay gap for long. Gender is just one of nine protected characteristics under the Equality Act 2010, and it’s not unrealistic to assume that pay gaps connected with the remaining characteristics will be addressed sooner rather than later.
In fact, the government has already issued a Consultation on Ethnicity Pay Reporting as part of its Industrial Strategy. The Consultation paper cites gender pay gap reporting as a vital step towards transparency, with ethnicity pay gap reporting similarly aiming to identify and remove the barriers to creating a diverse workforce.
Ethnicity pay gap reporting
Taking the lead from gender pay gap reporting, the Ethnicity Pay Consultation aims to investigate how best to report on ethnicity pay as well as use the data collected to create diverse workforces.
The Consultation paper accepts that there is greater complexity than just reporting on ethnicity, commenting that contextual factors such as gender, geographical and age variations also affect pay. The government wants to keep the burden on employers to a minimum, but it remains to be seen just how much data is going to required to report on to provide a full picture of ethnicity pay in their business. And remember, this will be alongside the existing and future gender pay gap reporting requirements
Who will be affected by extending pay gap reporting?
HR teams are clearly going to be affected by the extensions to reporting requirements – be it CEO and executive ratios or ethnicity pay gap reporting when it comes into force. However, as the requirements extend, so too will the impact on other teams in your business. Your senior leadership team will need to agree on how the business responds to their pay gap, and the measures you will take. Communications teams need to be on hand to craft this into a meaningful narrative for both the reporting process, and for staff and investors. Should your reports indicate a large pay gap, you may also need your PR team on standby to deal with press enquiries and the negative publicity it may generate.
Small businesses should be watching carefully to see how these proposals and consultations turn into reality, and plan carefully for how they will respond. It’s clear that pay gap reporting is not going away, and burying your head in the sand will not be an option as more and more businesses fall into the catchment required to report on their various statistics. Ensuring you have the mechanisms in place to capture and report data now will make life much simpler down the line. An employee management platform like BreatheHR can safely and securely store all the data you may need to report on, removing the requirement for HR staff to collate data from multiple spreadsheets, employee files and historical reports.
The impact of gender pay gap reporting
Changes are already rippling through the UK’s business community as a result of mandatory gender pay gap reporting. EasyJet, for example, has now committed to ensuring women make up at least one-fifth of all new pilot recruits by 2020 in a bid to close their 52% gender pay gap. Oil giant Shell is sponsoring scholarships for women entering STEM fields, while drinks giant Diageo is offering internships in manufacturing for women. This will reinforce the case for those arguing that this form of reporting should be extended to address other inequalities which exist in the workplace. We expect this will result in a greater number of employers being required to prepare reports and more information being disclosed.
Employers, however, do not need to wait until they are legally obliged to report. To attract and retain the best talent nowadays, employers may see the benefit in voluntary disclosure, which can send out a powerful message to potential new recruits and existing staff. In addition, preparing to make the changes that are likely to come into effect at this point will help avoid the headache of last-minute organising and gathering of data. Our expert employment lawyers are on hand to discuss how pay gap reporting may affect you and your business.
Pam Loch is Managing Director of the Loch Associates Group and Managing Partner of Loch Employment Law. To contact Pam, visit www.lochassociates.co.uk , or call 0203 6675 400.