Tag Archive: gender pay gap reporting

Gender pay gap reporting: what counts as ‘pay’?

Two weeks from today, 5 April 2017, marks the ‘snapshot’ date for which employers who are in scope need to collect the raw data on which to calculate their mean and median gender pay and bonus gaps. Employers will be required to publish information on their gender pay gap by 4 April 2018.

The requirement to assess pay data is the gross hourly rate of pay in the pay period which covers 5 April. Pay is calculated using gross figures, before any deductions for PAYE, National Insurance contributions, pension contributions, student loan repayments and voluntary deductions and takes into account both ordinary pay and bonus pay.

Ordinary pay means basic pay,  allowances, pay for piecework, pay for leave; and shift premium pay. It does not include overtime pay, redundancy pay, pay in lieu of leave, or non-monetary remuneration. 

Bonus pay means as any remuneration that is in the form of money, vouchers, securities, securities options or interests in securities and that relates to profit sharing, productivity, performance, incentive or commission.

These definitions give rise to some grey areas. The draft guidance published by Acas and the Government Equalities Office makes clear that the value of benefits provided under a salary-sacrifice arrangement do not count as ordinary pay; the employer should use the employee’s gross pay after any reduction for a salary-sacrifice scheme.  

The position in relation to pension contributions is still not entirely clear. The guidance says “The amount of an employee’s ordinary pay and bonus pay must be calculated before deductions are made at ‘source’. Employee pension contributions are a deduction, so whether or not an employee makes pension contributions will not affect the gender pay gap calculations” but it is arguable that employer contributions are not a deduction. A salary supplement that an employee receives because they have opted out of a pension scheme would be included in pay.

Benefits in kind are excluded from the definition of ordinary pay. This means that an employer should disregard the value of, for example, a company car provided to an employee. However, car allowances should be included in the calculation, as allowances are included in the definition of ordinary pay. Where an employer provides an interest-free loan to employees, such as a season ticket loan, the value of the loan should not be included as pay.

Should retrospective pay rises be included in the calculation? The regulations allow employers to ignore “any amount that would normally fall to be paid in a different pay period” but this does not cover pay which should have been paid in the relevant pay period but was not. 

Overtime is another grey area. Remuneration referable to overtime is excluded from the definitions of both ordinary pay and bonus pay. This suggests that employers should exclude not only actual overtime pay but also other elements of pay (such as allowances and shift premiums) earned in respect of overtime hours. If so, employers would need to distinguish between what is earned during normal working hours and what is earned during overtime hours. However, such a distinction could be difficult to draw in respect of some elements of pay. For example, how should an employer determine which part of a performance bonus or sales commission relates to work done during overtime hours?

These grey areas are bound to lead to inconsistencies in how employers in the same sector approach their data. Ultimately this risks making comparisons between employers of limited value. The most important consideration for employers may be to ensure that they take a consistent approach internally so they can track their own progress on the gender pay gap year-on-year.

 

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/gender-pay-gap-reporting-what-counts-as-pay/

Gender pay reporting: Who is in scope?

ACAS and the Government Equalities Office have published guidance on the gender pay reporting requirements due in force from April.  Employers will be required to publish information on their gender pay gap by 4 April 2018.

The guidance leaves a number of questions unanswered, including: Which workers are in scope?

We know that the report must include employees, zero hours employees and casual workers, plus other workers who provide personal services. But there are some grey areas:

  • What about contractors who supply their services via their own service company, or an intermediary? The guidance suggests that the contractor would count towards the headcount of the service company, not the end user but it is not clear that this is the right approach.
  • What about agency workers who are employed by an agency but provide personal service to the client.  Do both the agency and client have to report on those workers?
  • What if the employer does not have sufficient information to calculate hourly pay of its contractors?  There is an exception to the requirement to publish pay data for workers/contractors if the employer does not have the data and it is not reasonably practicable to obtain it. What does “reasonably practicable” mean?  The guidance suggests that employers should ‘consider’ whether it is reasonably practicable to obtain the information by asking for it and new contracts should seek, where possible, to ensure that contractors are required to provide the information needed for compliance. However, as the guidance is non-binding, employers may take a different view.

The most important consideration for many businesses may be to ensure that how workers are categorised for the purposes of gender pay reporting is consistent with and does not undermine the employer’s employment status strategy in other areas.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/gender-pay-reporting-who-is-in-scope/

Gender pay reporting regulations published, to come into force 6 April 2017

The Government has today published the revised draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, which are intended to come into force on 6 April 2017. Under the regulations, employers employing 250 or more employees will be required to publish information about the gender pay gap in their organisation.

The original draft regulations contained a number of problem areas (Se our Be Aware of 15 February 2016). Whilst some of those problems have been addressed in the new draft, some remain and there are some new problem areas to grapple with.

Employees

‘Employees’ are not defined in the draft regulations; however, the explanatory notes state that the definition of employment is the section 83 of the Equality Act 2010 definition which includes employment under a contract of employment, a contract of apprenticeship and a contract personally to do work. This would include many independent contractors. However, the impact of using the wide definition of employee is softened slightly by a new provision which says that the employer is not required to include data relating to an employee who is employed under a contract personally to do work if the employer does not have the data and it is not reasonably practicable to obtain it.

Partners, including partners in an LLP, are excluded from the definition of employee. It is not clear why this exclusion has been made.

The data snapshot

The requirement is to publish data captured at a snapshot date. This has changed from 30 April 2017 to 5 April 2017. The obligation to report is within a year of the snapshot date.

Pay

Pay is gross pay calculated before deductions at source. The definition of pay has been tweaked in the new regulations but has not changed substantially. Pay will include basic pay, paid leave, allowances, shift premium pay, and pay for piecework. Pay will not include overtime pay, expenses, benefits in kind, redundancy or other termination pay, payment in lieu of leave. Bonus pay is included but has a separate definition in the new regulations. Commission is treated as bonus pay.

The duty to publish annual information relating to pay

The basic obligations on employers who are caught by the regulations remain the same. They will need to publish:

  • The difference in the mean and median pay of male and female employees;
  • The difference in mean and median bonus pay of male and female employees;
  • The proportions of male and female employees who were paid a bonus in the previous year; and
  • The numbers of male and female employees employed in quartile pay bands.

However, the detail of what must be published has changed.

In calculating the mean and median pay gap, employees who are not on full pay due to being on leave are excluded. If an employee is being paid at a reduced rate or nil as a result of being on leave during the pay period which includes 5 April they are not included. Leave includes maternity, paternity, adoption, parental and shared parental leave, sick leave, annual leave and special leave. This could mean that many employees who are on annual leave on 5 April should be excluded; even without the impact of the holiday pay litigation, many employers perfectly lawfully pay employees less during annual leave than they would receive if they were not on leave; arguably, this is pay at a reduced rate. This could have a significant impact on some employers, particularly as the snapshot date will often fall in the Easter holiday period.

Employees on leave are also excluded from the quartiles information but are not excluded from the calculation of mean and median bonus or proportions of employees paid a bonus.

Bonus

The definition of bonus has been clarified and now makes it clear that pay in the form of securities, securities options and interests in securities is treated as paid at the time when and in the amounts in respect of which it gives rise to taxable earnings.

Calculation of the hourly rate of pay

The new regulations set out in detail the steps involved in calculation of the hourly rate of pay of relevant employees, presumably intended to mitigate the impact of unusual work patterns and achieve a more accurate comparison. The steps are as follows:

  • Identify the pay period – generally speaking, the period in respect of which the employer pays basic pay (weekly, fortnightly, monthly etc);
  • Identify all amounts of pay and bonus pay paid during the pay period which includes 5 April;
  • Exclude any ordinary pay which would normally be paid in another pay period;
  • If bonus (which includes commission) is calculated over a different period, pro-rata it in respect of the pay period;
  • Add together the ordinary and bonus pay as adjusted;
  • Multiply by (7 divided by the number of days in the pay period); and
  • Divide by the number of working hours in a week.

There is  a new provision which determines how to calculate working hours; either normal working hours or an average over a 12 week period if the employee has no normal working hours.

Quartiles

The new regulations set out in detail how the quartile pay bands should be calculated. This was unclear under the old regulations. Once the hourly rate of pay for all full-pay relevant employees (ie not those receiving reduced or nil rate due to being on leave) has been calculated, those employees should be ranked from lowest hourly rate to highest hourly rate. The list should then be divided into 4 sections each containing (so far as possible) an equal number of employees. The employer must publish the proportion of male and female employees in each quartile as a percentage.

In recognition of the fact that this method is potentially open to manipulation, as employers can decide which quartile employees on the same hourly rate of pay are assigned to,  the regulations require employers to assign relative proportions of male and female employees to each quartile – so if there are 20 employees who could legitimately be put in either of 2 adjacent quartiles and 10 are male and 10 female, 5 of each should be assigned to each of the 2 quartiles.

Form and manner of publication

Here there has been no change. The information must be published on the employer’s website in a manner which is accessible to its employees and the public, for a period of at least 3 years, and it must be accompanied by a statement signed by a director (or similar for non-companies) which confirms that the information is accurate.

Enforcement

Whilst the new regulations, like the old regulations, do not expressly contain any sanctions for failure to comply, the explanatory notes state that a failure to comply with an obligation imposed by the regulations will constitute an ‘unlawful act’ within the meaning of section 34 Equality Act 2006 which empowers the Equality and Human Rights Commission to take enforcement action. Such enforcement action is, in practice, unlikely due to the EHRC’s limited resources but does mean that the regulations are theoretically not completely toothless.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/gender-pay-reporting-regulations-published-to-come-into-force-6-april-2017/

Employers must prepare for gender pay gap reporting as IFS report confirms 18% gap

Today’s publication of a report by the Institute for Fiscal Studies brings the gender pay gap into sharp focus once again.  The report confirms that the hourly wages of female employees are currently about 18% lower than men’s on average, and that the impact of taking time out of the workplace for family reasons continues to have a significant impact upon a woman’s pay potential for the remainder of her working life. Although this news is unsurprising – concurring with previous reports – its publication is timely, coming at a point when addressing the gender pay gap is high on the Government’s agenda, and reinforcing the need for action.

The Government has already made progress with legislation in this area. In February 2016, the Government confirmed that it would bring in laws to require employers of 250+ employees in the private and voluntary sectors to publish their gender pay gaps. See our previous Be Aware alert for details.  The final legislation is still awaited and it appears will not be ready for its original October timeframe – although the power in the Equality Act 2010 to make the regulations did finally come into force on 22 August 2016.  Instead, the legislation will reportedly take effect in April 2017.

It is expected, however, that the proposal for employers to take a first data snapshot of their pay arrangements in April 2017 will still stand, meaning that there may be a very short timeframe between employers knowing what their final obligations are, and having to comply. The first snapshot figures are also likely to relate to the period from May 2016, meaning that employers should already be thinking carefully about pay decisions and ensuring they are transparent, moderated and carefully documented. Employers will have until April 2018 to publish their first gender pay gap figures.

In the meantime, the Government has also published this week a consultation paper on gender pay gap reporting obligations in the public sector, which largely mirrors that of the private sector.  The consultation closes on 30 September 2016.

With the Government committed to closing the pay gap between men and women, employers must ensure their houses are in order. Take our quiz, How equal is your organisation’s pay? to help identify where there may be pay issues in your organisation, but be sure to seek legal advice before taking any remedial action.  Legal privilege may be able to protect the confidentiality of your information and the steps you plan to take.

If you wish to discuss gender pay in your organisation, or would like a copy of our ‘Gender pay gap reporting’ flyer, please contact Clare Gregory or Kate Hodgkiss, Partners in our Employment team, or speak to your usual DLA Piper contact.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/employers-must-prepare-for-gender-pay-gap-reporting-as-ifs-report-confirms-18-gap/