The Government has published revised Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the "Regulations"), which amend and update the draft regulations that were released in February 2016. The revised Regulations will come into force on 6 April 2017. Employers in scope will need to be aware of the changes and be taking steps to ensure that they are in a position to publish their first gender pay gap report by 4 April 2018. The key changes in the Regulations as compared to the February 2016 version are summarised below.
Definition of "employees"
The Regulations require employers with over 250 employees on the "snapshot date" (see below) to publish data regarding their gender pay gap. The definition of employees has been clarified in the explanatory notes by reference to section 83 of the Equality Act 2010. This means that those working under a contract of employment, a contract of apprenticeship or a contract to personally do work will all be caught for the purposes of determining which employers are in scope. This is a significant clarification and, depending on the nature of the worker's contract, this could include self-employed contractors who are not on the employer's payroll system. However, the Regulations provide that there is no obligation to include pay data relating to workers (as opposed to employees) where the employer does not have such data and it is not reasonably practicable to obtain it. The definition in the February 2016 version of "employees" as being those who ordinarily work in Great Britain and whose contracts of employment are governed by UK legislation does not appear in the revised Regulations; this may be clarified in subsequent guidance but, for the time being, the intention behind this change is unclear.
The timeline for capturing and publishing data has been brought forward slightly. The "snapshot date" is now 5 April 2017 (changed from 30 April 2017) meaning that the first gender pay gap reports must be published by 4 April 2018, based on hourly pay data as at 5 April 2017 and bonus data from the preceding year. This should assist employers as relevant bonus data can be taken from form P60s.
Components of pay
The pay components to be collected and analysed largely remain the same, but the Government has included separate definitions for "ordinary pay" (comprising basic pay, allowances, pay for piecework, pay for leave and shift premium pay) and "bonus pay" (comprising cash, vouchers, securities, securities options or interests in securities which relate to profit sharing, productivity, performance, incentive or commission). Both elements of pay are used to determine the hourly pay rate and more detailed provisions have been included in the Regulations to explain how this must be calculated. The Government has also clarified that bonuses in the form of securities, securities options and interests in securities are to be treated as paid to the employee at the time, and in the amounts in respect of which, they give rise to any taxable earnings.
Calculations of pay
The measures of the gender pay gap are the mean and median pay gap with reference to hourly pay, the mean and median pay gap with reference to bonus pay, the proportion of male and female employees who receive a bonus and the total number of male and female employees in each quartile pay band.
One of the most significant amendments in the revised Regulations relates to the calculation of hourly pay. When calculating hourly pay (for the purposes of the mean and median pay gap and quartile proportions), employers should refer only to "full-pay relevant employees". This means that employees who are paid at a reduced rate or nil as a result of being on annual leave, maternity, paternity, adoption or shared parental leave, sick leave and/or special leave during the pay period within which 5 April falls. The pay period is, generally speaking, the weekly, fortnightly or monthly period in respect of which the employer pays basic pay. This change addresses the concern that an employer’s gender pay gap could appear to be greater if, for example, it had a significant number of female employees absent on maternity leave and receiving statutory maternity pay (or no pay) at the snapshot date. These employees are not, however, excluded from the bonus pay gap calculations.
In light of the February 2016 draft regulations, there was much debate as to whether the pay quartiles should be split by reference to the number of employees or the overall pay range. The revised Regulations clarify that employers should follow the former approach and each quartile should contain (as far as possible) the same number of employees. To avoid manipulation of quartile data, the Regulations provide that where employees on the same hourly rate of pay fall within more than one quartile (i.e. because of the requirement to assign equal numbers to each quartile), the relative proportion of male and female employees receiving that rate of pay must be the same in each of the relevant quartiles.
The explanatory notes state that failure to comply with the Regulations constitutes an unlawful act under s34 Equality Act 2006 Equality Act and the Equality and Human Rights Commission can take action. The February 2016 draft regulations contained no sanctions so this indicates a movement by the Government to ensure that the regulations are taken seriously. In reality though the key incentive for complying with the Regulations will remain the adverse PR consequences flowing from the likelihood that the Government will publish league tables and identify non-compliant companies.
If you should require support from any of us on gender pay gap reporting or any wider employment legal issues, please do not hesitate to get in touch.