Gender pay and equal pay are frequently confused. However, there are key differences between the two, and employers need to be aware of their obligations in relation to both.

Both the measures designed to ensure equal pay and those aimed at closing the gender pay gap have the overall objective of eliminating sex discrimination in relation to pay. However, at its core, the intention behind equal pay is to ensure that men and women are not paid differently for doing the same or similar work. This, on its own, does not prevent a gender pay gap. Even if an employer has an effective equal pay policy, it could still have a gender pay gap if, for example, the majority of females are employed in lower-paid jobs. The intention behind gender pay gap reporting is therefore to increase transparency of the differences in pay between men and women in the workplace with the aim of closing the gender pay gap.

In the world of work, one of the most devastating long-term impacts from the Covid-19 pandemic has been on gender equality. We have seen recent momentum towards gender balance in leadership regress significantly. It is now estimated that the time it will take to close the gender gap has widened from an already depressing 99 years in 2020 to an astounding 135 years this year. Covid-19 has exacerbated and heightened the barriers that already existed to women’s progression in business and it’s time we did something about it – and not just because the law encourages us to.

What are the obligations for employers?

The legal right to equal pay has existed since the 1970s and is enshrined in the Equality Act 2010. It applies to all employers, no matter how small.

The requirement to report a gender pay gap applies only to employers with 250 or more employees. It is a reporting requirement and requires an organisation to publish specific data on its website:

  • the difference in mean pay between male and female employees;
  • the difference in median pay between male and female employees;
  • the difference in mean bonus pay between male and female employees;
  • the difference in median bonus pay between male and female employees;
  • the proportions of male and female employees who were paid bonus pay; and
  • the proportions of male and female employees in each quartile of their pay distribution.

The pay information must be based on data from a snapshot date of 5 April every year (31 March for the public sector). The bonus information must be based on the preceding 12-month period.

Employers have 12 months from the snapshot date each year in which to publish the information (delayed to 5 October in 2021) on their website and on the gender pay gap reporting portal on the GOV. UK website and it must remain accessible for at least 3 years.  For private-sector and voluntary-sector employers, the report must include a written statement confirming that the information is accurate. This must be signed by a director, partner or member of the organisation’s governing body.

What sanctions apply to each?

A successful equal pay claim will typically result in compensation to the employee by way of arrears of pay, or damages for non-pay terms and further damage to reputation can ensue. But unlike an equal pay claim, there is currently no financial sanction as a result of failing to publish a gender pay gap, although the Equality and Human Rights Commission (EHRC) can take enforcement action. In addition to the risk of enforcement action by the EHRC, employers should consider the potential damage to their reputation of non-compliance with the gender pay gap reporting duty. An employer that publishes information on its gender pay gap in line with the duty, along with an explanation putting the figures in context and providing details of steps that it is taking to address the gap, is likely to be far more attractive to potential future employees than an employer that has failed to comply with the duty.

What actions should your business take?

Conducting an equal pay audit enables an employer to:

  • identify where men and women are doing equal work and compare their pay;
  • identify and explain the reasons for any pay differences; and
  • eliminate any pay differences that are either directly or indirectly discriminatory.

If pay gaps have been found, the specific actions that the employer will need to take will depend on the nature and extent of the pay gaps identified and their causes.

Where pay gaps are identified, an action plan should include arrangements for the following:

  • Providing equal pay.

If the audit finds pay gaps related to gender, disability, ethnicity, or working pattern for which there is no justification, the employer should plan to provide equal pay for current and future employees as soon as is practicable. If the pay discrimination found is direct pay discrimination against women, it needs to be addressed immediately.

  • Changing the pay policies and practices that contribute to unequal pay.

An employer will need to change any pay policies and practices that have contributed, or continue to contribute to, unequal pay. These may include policies and practice that relate to starting salaries, performance management systems, promotion calculations, market supplements, pay protection and eligibility for bonuses and allowances.

It is also important to examine what is preventing women from being represented equally at senior leadership levels, pinpointing the Societal, Organisational and Personal barriers that prevent gender equality in your own workplaces and putting in place proactive remedial steps to negate them.

  • Provide a narrative.

While there is no obligation for employers to provide any explanation, or narrative, to accompany the gender pay gap information that they publish, HR Optimisation encourages employers to do so to prevent or limit potential reputational damage – or to celebrate the equality of results depending on the findings. For example, a gender pay gap may affect how external parties, including customers, competitors and prospective employees, view an organisation. A gender pay gap may also impact employee engagement.

HR Optimisation is happy to assist clients in developing their narrative, which is an opportunity for the employer to:

  • present an explanation for its gender pay gap, or any particular aspects of it;
  • put its gender pay gap information into context, for example where the employer operates in an industry that struggles to recruit women at any level or at certain levels;
  • provide details of what the employer considers are mitigating or distorting factors, for example a large number of part-time employees who are paid pro-rata bonuses; and
  • set out any steps that it has taken, or intends to take, to address its gender pay gap issues.

Conclusion

Conducting equal pay  and gender pay gap audits and having a well written gender pay reporting and equality and gender action plan is an important part of an employers attractiveness to current and future employees, as well as being a legal obligation depending on your company’s size.  If you would like assistance with reviewing or drafting a report on your own equal pay and/or gender pay gap in your business, please do get in touch for a no-obligation chat.

 

 

 

Hannah Powell