PAYnotes: The government has suggested reducing gender pay reporting to 50 employees

The government has suggested reducing gender pay reporting to 50 employeesSince the government first published the draft regulations on gender pay gap reporting on the 12th February, employers have regularly been asking us to keep them updated on developments from the government. This has proved difficult, as very little has been released by the government. However, I have found some interesting developments to the draft regulations.

As of the 11th March, the government set up a second consultation, asking employers to state what, if any, changes should be made to the draft regulations. The government has said that the feedback collected suggests the regulations “are largely welcome and can play a part in concentrating organisations’ minds on where pay gaps exist and how they might be reduced”. However, employers have highlighted the limitations of the figures specified in the draft regulations. The CBI made an interesting point:

“It is vital that the difference between equal pay and the gender pay gap is understood, otherwise businesses run the risk of facing an increased level of unwarranted and misunderstood equal pay claims when they report a gender pay gap in their company.”

Another key suggestion was to include an analysis of pay gap figures by age and part-time status as there is evidence that shows that older women (for example, those over 40) and those who work part-time are most affected by the gender pay gap. This has been put forward by the government as a recommended amendment to the draft regulations.

Some organisations said they felt the draft regulations did not go far enough and should require employers to take action if they find a gap. Indeed, a common suggestion was to provide a mandatory narrative / explanation of what is causing the gap, and then an action plan to address it. Many cited the success of similar action-based approaches in countries like France and Germany. However, employers argued firmly to encourage a narrative, rather than making it mandatory. Indeed, most employers that we have spoken with have said they would need to publish some narrative in order to lessen the impact of the potential negative PR from publishing wide pay gap figures. Answering these points, the Government has said it will “strongly encourage“ employers to provide a narrative.

Interestingly, another suggestion has been to lower the threshold from the current minimum of 250 employees as it has been argued that, in its current form, the legislation would only cover a third of the UK workforce. Indeed, the European Commission recommends a minimum of 50 employees for gender pay reporting. Although, many employers argue against the administrative burden of reducing this threshold from 250 employees.

Despite the 250 threshold, smaller organisations have told us they are interested in conducting equal pay audits. Many realise that employees will take a greater interest in pay equality due to the wider media coverage generated by gender pay reporting, and many also recognise the organisational advantages of having pay equality anyway. Considering this, the government has suggested reducing the minimum to 150 employees and then reducing this to 50 employees within two years of the regulations commencing.

Throughout the consultation process, the government is evolving its strategy and the feedback received has certainly helped shape this as the government has stated:

“If gender pay gap reporting is to have any impact it must help employers understand why pay gaps exist and lead to action to address these problems. It must be seen as the beginning of a process rather than the culmination of a tick box exercise.”

Lastly, there have been comments to increase transparency in the figures, for example through conducting an equal pay audit. Certainly the CIPD re-enforced what many employers have told us independently, that “any potential remedy to the (pay) gap is only possible if organisations learn why such a gap exists”. Having considered these comments, the government stated:

“Equal pay audits can be a useful tool for organisations to analyse the relative positions of men and women. They can also be costly and time-consuming so we would not recommend them being mandatory. However, expertise that exists around equal pay audits could successfully be used by organisations looking for ways to take action on their gender pay gap.”

Under the original timetable, the regulations were due to be laid before parliament in June and July. Having spoken this week to my contact in the Government Equalities Office (Gender Pay Gap Team), they stated that the government are still working through the issues raised in the consultation and that the regulations had not been raised for parliamentary debate before the summer recess. Given that parliament does not return until early September, it appears employers will have to wait a while longer before hearing anything further. This will be of concern as the regulations were originally due to come into effect from the 1st October.

Nevertheless, more and more employers are contacting us as they are wishing to look at gender pay now, rather than wait until it is too late.

If you have any questions on gender pay reporting or require further information on conducting an equal pay audit please contact Tim Kellett on 01733 391377 or via timk@paydata.co.uk.