20 December 2016

The long awaited Regulations introducing the gender pay gap reporting obligations have been finalised - the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. They apply to any private sector employer (a legal entity rather than a Group of companies) which employs 250 or more employees.

Starting from April 2017, employers must work out the average pay gap between their male and female employees during the pay period that encompasses a specific “snapshot” date (5 April 2017). That information must then be published within the next 12 months after the snapshot date, and remain on the company’s website for 3 years. Information must also be submitted to the Secretary of State. 

There are detailed provisions as to what information must be provided, and how it is to be calculated. The basics are:

• Set out the gaps between the mean, and the median, rates of pay for men and women
• Set out the mean and median annual bonus/commission gap between male and female employees, and how many male/female employees received a bonus at all
• Divide the payroll into 4 quartile pay bands (rank all employees’ pay in order, highest to lowest paid, and then divide into 4 quarters containing equal numbers of employees) and state how many male and female employees fall into each category

As ever, the devil is in the detail, and the Regulations set out the definitions of the relevant terms:

• A wide definition of “employee” is used, which will include many persons who are viewed as self-employed contractors. Only the genuinely self-employed, in business on their own account, will be excluded. Partners and LLP members are also excluded.
• However, staff who are absent on sick leave, maternity leave, or other family leave will be excluded from the pay gap calculation itself, as that could unfairly distort the true position in relation to wages
• “pay” includes bonuses, even if the bonus is awarded in terms of shares or share options – there are provisions as to how such awards should be valued

There are very detailed provisions to assist with the calculation, but it is clear this will not be an easy task. If you are affected by these Regulations, you need to immediately start thinking about whether your payroll system is capable of providing the desired information, and what steps will need to be taken to carry out the necessary calculations.

This is a new and challenging area for employers, and it is important that expert advice is obtained.

Contact: Douglas Strang Senior Associate dst@bto.co.uk T. 0141 221 8012