Tag Archive: equal pay audits

Gender pay gap consultation published

Clare Gregory, a Partner in our Sheffield office, comments: The Government has today published an initial consultation on legislation which will implement gender pay gap reporting for organisations with 250 or more employees.

The requirement to publish gender pay data has had a complicated legislative history. Section 78 of the Equality Act 2010 introduced a power to make Regulations requiring employers to publish information relating to the pay of employees for the purpose of showing whether there is a difference in pay between male and female employees. However, s.78 was not brought into force. Towards the end of the last Parliament a late amendment to the Small Business, Enterprise and Employment Act 2015 included a provision requiring Regulations under s.78 to be made within 12 months of that Act coming into force; however, that provision was also not brought into force. In the meantime, the Coalition Government introduced a voluntary pay data reporting initiative, ‘Think, Act, Report’, but since its launch in 2011 only 5 companies have published pay details.

The Government is now proposing to introduce Regulations under s.78 which will require employers in the private and voluntary sectors in Great Britain with at least 250 employees to publish information about the pay of their male and female employees. A person will be considered an employee if they are employed under a contract of employment, a contract of apprenticeship or a contract personally to do work. This encompasses employees, workers and a wider category of individuals who are self-employed, provided that their contract obliges them to perform the work personally: ie if they are not permitted to sub-contract any part of the work or employ their own staff to do it. The new reporting requirements will not apply to most public authorities who are required to comply with the public sector equality duty and, therefore, already have broader equality obligations than most other employers.

The Government is consulting on what form of reporting will be required. Options include an overall gender pay gap figure measured by calculating the difference in earnings between all men and all women employed by the organisation, gender pay gap figures broken down by full-time and part-time employees and gender pay gap figures broken down by grade or job type.  The metrics chosen will be crucial; the overall pay gap figure in most organisations will be largely meaningless as it can be disproportionately affected by a small number of high earners. A requirement to break the data down by grade or job title is much more likely to highlight an equal pay problem and therefore expose employers to the risk of equal pay claims, but there are likely to be significant difficulties in how to define grade or job type.

The Government is also consulting on whether any additional narrative information should be required, for example explaining any pay gap and setting out what remedial action the employer plans to take.

Reporting will not be required more frequently than once every 12 months but the consultation seeks views on whether it should be required less frequently.

It is expected that the new Regulations will be made during the first half of 2016, but commencement is likely to be delayed to give businesses an opportunity to prepare for implementation, and may be on a phased basis affecting the largest organisations first. Nearly 8,000 employers will be required to report some information about pay data when the Regulations are implemented.

A copy of the consultation paper ‘Closing the gender pay gap’ can be accessed here. The consultation closes on 6 September 2015.

It is questionable how successful the proposed legislation is likely to be in its stated aim of closing the gender pay gap. The overall UK gender pay gap stands at 19.1%, although the gap for full-time employees has narrowed to 9.4%. The causes of the gender pay gap are complex and multi-factoral.  Female part-time employees are paid more than their male counterparts but as part-time work is often low-paid and a higher proportion of women than men work part-time, this continues to have a significant impact on the overall gap. Women are still concentrated in lower paid occupations such as caring whereas many of the highest paid sectors are disproportionately made up of male employees.

Employers may wish to get their houses in order before being exposed to public scrutiny. Employers who will be affected by the proposed Regulations can use the lead in period before implementation to conduct an audit of pay arrangements to identify potential problem areas and help the organisation to manage and present information meaningfully and in context.

Permanent link to this article: https://www.dlapiperbeaware.co.uk/gender-pay-gap-consultation-published/

New regulations give tribunals the power to order equal pay audits

Sandra Wallace, UK Employment Group Head, comments: In 2012, the Government first proposed the introduction of compulsory equal pay audits for employers who are found by an employment tribunal to have committed an equal pay breach. Now, two years down the line, and a number of consultations later, the Government has confirmed that this measure will be introduced in October 2014.  Draft regulations have just been published.

So what does this mean for employers? This measure is part of the Government’s programme of employment law reforms aimed at addressing the gender pay gap.  It introduces for the first time, a power for employment tribunals, to require employers to audit their pay policies and practices if they are found to have breached equal pay legislation or sex discrimination provisions relating to pay.   The results of the audit must be provided to the tribunal who will determine whether or not it is compliant with the terms of its order. If the audit is compliant, the employer is required to publish it on its website (if it has one) for at least 3 years, unless to do so would breach a legal obligation (in which case it must provide the tribunal with reasons why it considers that publication would breach a legal obligation). If the audit is not compliant the tribunal must order the employer to amend it.

On the face of it, these measures seem onerous and draconian; however, they are subject to a number of important exceptions. For example, audits cannot be ordered if an employer has carried out an audit meeting the required standards within the previous 3 years; or if it is clear without an audit whether action is required to avoid equal pay breaches; or if the tribunal has no reason to think that there may be other breaches. It will, therefore, remain to be seen how often such audits are actually ordered in practice.  Businesses with fewer than 10 employees and certain new businesses will also be exempt from the regulations for up to 10 years.

Employers may be fined up to £5,000 for any failure to comply with an order to carry out a pay audit, payable to the Secretary of State. The tribunal will have regard to the employer’s ability to pay in deciding whether to order, and the amount of, any penalty.

Employers should carefully assess the impact of this new law on their business. In practice, it will only come into play if an employer unsuccessfully defends an equal pay claim. Employers who already have transparent and equal pay structures are unlikely to face claims in the first place; those who may be at risk may be more minded to settle a claim than progress to a tribunal hearing to avoid any risk of an equal pay audit being ordered.  It may, however, also serve as a useful impetus for employers to get their house in order now and fully review pay policies and practices at this stage to minimise any future litigation risks.

Permanent link to this article: https://www.dlapiperbeaware.co.uk/new-regulations-give-tribunals-the-power-to-order-equal-pay-audits/