Are You Prepared for the New Gender Pay Gap Reporting Laws?

It was announced in April 2017 that larger businesses would have to submit a governmental report, detailing the gender pay gaps that present in their company. The deadline for the first pay reports will have to be submitted by April 2018. Below, Gideon Schulman, a HR director at Pytronot, specialists in payroll solutions, explain how business should best be prepared.

With gender pay filling the headlines recently, including Google’s discrimination allegations and the announcement of the BBC revealing huge discrepancies in male and female wages, it is not an issue that is likely to disappear easily or quietly. Chris Evans has been announced as the highest paid star of the BBC. He made between £2.2m and £2.25m in 2016/2017, meanwhile Claudia Winkleman was the highest-paid female, earning between

£450,000 and £500,000. These gaps are astronomical, the top seven earners in the list of the BBC’s 96 best-paid stars, were all male. The gender pay difference reflected across each of the BBC’s shows and channels. This is now something they have pledged to make equal by 2020, other companies now have to prepare for their reports to go public.

It is important that we encourage organisations to take measured responses and not be reactive. Aside from the financial and legislatory risk, it can have a significant impact on stakeholders both internally, i.e. staff, and externally with customers. It is therefore critical to be proactive and as the scouting movement say, ‘be prepared’.

On the 5th April 2017, the Equality Act 2010 (Specific Duties and Public Authorities) Regulations of 2017 brought in a requirement that forces UK companies with a total ‘headcount’ of more than 250 in any one year, to publish data about their gender pay gap. The data presented should be seen as a snap shot on pay. What will cause some concern to businesses is the definition of ‘headcount’. Taken from the Equality Act 2010, this includes employees, apprentices and workers. Agency workers are included, but counted by the agency providing them. This is not an article to discuss gender biases but to discuss the practical implications.

So what does this mean in layman’s terms? Results must be published on the organisations own website and a government website within 12 months of commencement date: 31st March 2017 for Public Sector and 5th April 2017 for Private and Voluntary sector.

The data presented has to be based on 6 calculations:

1. Average gender pay gap as a mean average
2. Average gender pay gap as a median average
3. Average bonus gender pay gap as a mean average
4. Average bonus gender pay gap as a median average
5. Proportion of males and females receiving a bonus payment
6. Proportion of males and females when divided into four groups in order from lowest to highest pay.

While the government has specified that ‘any organisation that has 250 or more employees’ must publish and report specific figures about their gender pay gap, companies of all sizes can take steps to close the gap. Companies around the 250-employee mark or with imminent expansion plans should be particularly vigilant, as they are likely to be included in the very near future. Taking a proactive approach will only act to benefit smaller companies, putting them on the front foot and making the entire process far easier in the long run.

Organisations have the option to provide a narrative with their calculations. This should generally explain the reasons for the results and give details about actions that are being taken to reduce or eliminate the gender pay gap. By default, the regulations do not account for individuals’ knowledge, experience or pay negotiations, which may distort the figures and should be captured in the narrative.

Advice for all businesses including SME’s would be the following:

• Be proactive and try to limit the influence of unconscious and conscious biases. This would need to be in the interview stages and compensation process, by training managers and salary decision makers to understand unconscious bias.
• Create awareness of the gender pay gap issue and get them to support and encourage women to progress and ask for promotions (where available).
• Review reward packages in terms of parental leave, flexible working and having access to high quality childcare help for both men and women at work and at home.
• Challenge and encourage women about stereotypes and that they are not suppressed or less valuable in an organisation because of child-rearing responsibilities – they should not assume a lower salary because of this!

While the focus is primarily on larger businesses, ignoring the pay gap will carry a risk for SMEs. Ensuring policies and reviews are implemented now will ensure any systematic inequality is tackled head on; this then won’t pose a problem if laws for small businesses are introduced. This will not only improve your business’ performance but will undoubtedly strengthen the workforce and ultimately the economy.

For companies lacking the internal support required for these measures, seeking professional guidance externally can ensure businesses are given objective advice on data and options going forward.

In conclusion, although it may seem daunting and is easy to criticise the process, it will take time for the bumps to be ironed out. Equally, there is still talk whether it will move to less than a 250 headcount in the future, so being prepared is key to any business.