Gender pay gap reporting: what do businesses need to know?
The government’s latest pay gap report has revealed that in 2021, women earned 90p for every £1 earned by a man. Reports in 2022 found that in industries including finance and construction the median gap has widened, with women earning 88p and 76p respectively compared to male counterparts.
More recent estimates suggest women earn on average 16% less than their male counterparts globally, although this percentage is far greater in many sectors.
Following these reports, there is increasing pressure for employers not just to report the numbers but instead understand the reason for the gap, the importance of reporting and be transparent about how they intend to tackle this. Paul Kelly, head of employment law at Blacks Solicitors shares his advice on what businesses need to know about the gender pay gap.
What is the gender pay gap?
The gender pay gap is the difference between average male and female pay within individual organisations and across the UK as a whole. This is normally expressed as a percentage.
The Gender Pay Gap reporting rules were introduced by the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, and from 6 April 2017, companies with 250 or more employees have been legally required to display the gaps in earnings between men and women in a bid to reduce the 17.9% average difference that existed.
The only organisations that are exempt from publishing this data are organisations with 249 employees or less.
To calculate its gender pay gap, companies must work out the difference between the average pay of all male employees and the average pay of all female employees, and then divide that number by the average pay of all male employees. This information must be based on payroll data from a sector specific ‘snapshot date’ each year.
The importance of gender pay gap reporting
Transparency from businesses is vital to achieve gender equality within the workplace. Businesses should aim for equal pay, equal treatment, equal access and equal representation. Research shows that businesses that actively support gender equality have more inclusive teams that make better decisions up to 87% of the time.
In May 2019, 47 companies were ‘named and shamed’ by the Equality and Human Rights Commission (EHC) for failing to submit their gender pay reports within the deadline. It is now a legal requirement for all affected employers to report and publish their gender pay gap information with a narrative on their website as well as submit it to the government. Failing to do this within one year of the snapshot date is unlawful.
What do businesses and employers need to declare?
Businesses initially need to identify if they are required to report and which employees they must include, alongside their reporting deadline and understand how to provide supporting narrative. Finally, employers must gather gender pay gap data and submit their gender pay gap calculations within one calendar year of their snapshot date.
Snapshot dates will vary depending on the sector and business structure and it is the responsibility of the employer to identify this date. In the case of private and voluntary employers, the snapshot date is 5 April.
Employers must declare the difference between the mean hourly rate of pay for ‘full pay’ male and for ‘full pay’ female employees. This must exclude any employees who had reduced pay due to, for example, maternity leave or sickness leave during the pay period in which the business’ snapshot date falls. The difference between the female and male full pay median during the pay period and the difference between the median bonus paid to male and female employees during the 12 month period prior to the snapshot date falls must be reported.
Businesses must also declare the proportion of male and female employees who were paid bonuses during this 12 month period. This is calculated on the basis that, for example, if of the ten females employed two receive bonuses, the proportion will be 20%.
As well as simply reporting on their gender pay gap, employers are encouraged to use this process to put in place an action plan to not only reduce pay disparity between men and women, but to improve the recruitment, retention and progression of women in the workplace.
For more information, please visit: www.lawblacks.com/personal/employment-law/