My reading of this latest announcement is that employers will need to calculate a baseline pay gap figure(s) as at April 2017 and then a subsequent figure(s) in April 2018, which will then be published. This will highlight if any progress has been made between the two figures. Employers will therefore need to identify what is driving the baseline figure and take action to close the gap. A lack of progress may be highlighted in the league tables published by the government in 2018.
The timing of the annual pay review will determine how much time employers have to take action. For employers who review their employees’ pay between May and December, their 2016 review will influence their baseline 2017 pay gap figure(s). Employers should therefore not be complacent about the 2018 deadline.
This latest development certainly achieves the governments’ stated aim of placing the spotlight on employer pay equality and encouraging employers to close the pay gap. As Nicky Morgan said, that there should be "nowhere for gender inequality to hide".
Interestingly, we have also been informed by the gender pay gap team (within the governments’ equalities office); that there will be a second consultation over the remainder of February, until the 11th March. This will seek views from employers on the specific details of the draft regulations.
This would seem to back up the general view that the consultation has merely served to underline how difficult it will be for employers to present a meaningful analysis of their gender pay gap. Indeed, the consultation document itself states the shortcomings of publishing one, sensational (and perhaps alarming) pay gap figure that does not explain the pay differences.
It is obviously important that the metrics to be reported are clearly defined as there is debate about what is included or excluded, for example, earnings distribution across different levels of income and seniority. To help employers understand what information they will need to publish, I will follow up shortly with a summary of the main points from the latest consultation.
In the meantime, with, according to the Ministry of Justice, the average sex discrimination award increasing from £14,336 to £23,478 in the last 12 months, employers are naturally keen to clarify their legal obligations sooner rather than later. In this respect, the second consultation is welcome.
Despite this latest announcement, I would point out that the 2010 Equality Act states that ‘employers must give men and women equal pay if they do the same / broadly similar work’. So, regardless of Gender Pay Reporting, it is still illegal for employers to pay men and women differently if they do the same or broadly similar work. Gender Pay Reporting will only serve to place the spotlight on pay equality. Although employers now have greater confidence about the timeframe, being pro-active about quantifying your equal pay position is an essential approach for employers to take, given the potential financial damages from an employee tribunal.
Despite this, the results from a recent Paydata survey of 80 organisations, suggests much work is still required by employers, as only a minority state that they have recently conducted an equal pay audit: