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The gap is still opaque: the final draft of the Gender Pay Gap Regulations for the Private sector

The gap is still opaque:  the final draft of the Gender Pay Gap Regulations for the Private sector

Provision for equal pay audits was introduced in s. 78 of the Equality Act 2010 (“EqA”) but that section was not enabled and lay dormant until a campaign to revive it several years later. The Small Business, Enterprise and Employment Act 2015, s. 147 permitted for regulations to be made to implement s. 78 (although that section is not yet in force) and provided that:

The Secretary of State must, as soon as possible and no later than 12 months after the passing of this Act, make regulations under section 78 of the Equality Act 2010 for the purpose of requiring the publication of information showing whether there are differences in the pay of males and females.

David Cameron launched a consultation process, “Closing the Gap”, on 14 July 2015. There were nearly 700 responses. Regulations were then published in February 2016 (”the original

Regulations”) and were then put out for a month-long consultation process closing in March 2016, which received some 150 responses. On this occasion, respondents were simply asked what modifications should be made to the final Regulations.

Those finalised Regulations were due to be laid before Parliament in June or July 2016 before the Summer Recess and to come into force on 1 October 2016. However, in August 2016, the Government let it be known that it was still working through the February Consultation feedback and that implementation would be delayed. The finalised Regulations, the Equality Act 2010 (Gender Pay Gap Information) Regulations, were published on 6 December (“the Regulations”), will be laid before Parliament and should become law on 6 April 2017. The Regulations have clearly undergone some substantial amendments since February 2016. However, they do not address many of the original problems highlighted by respondents to both the previous consultations, and in some cases the changes have simply added to those problems.

The fundamental issue is that the Regulations have no teeth. Although s. 78(5) EqA provided for implementing regulations to include a fine and summary conviction for non-compliance, neither the original Regulations nor the Regulations have any such provision. The Government has indicated that it might “name and shame” companies who do not comply, but this might not prove much of a deterrent. It is also open to claimants in an equal pay claim to ask the Tribunal to draw an inference from non-publication. However, if an employee cannot get access to the relevant information in the first place, there may never be in a position to bring an equal pay claim at all. Despite the fact that the Government indicated that the Private Sector and Public Sector GPG Regulations (the consultation for the latter was published in August 2016) should mirror each other, in this respect they do not; the Public Sector GPG Regulations envisage that non-compliance will be enforced by the EHRC as it does for other breaches of the Public Sector Equality Duty.

The Regulations continue to apply to private sector employers with over 250 employees (reg. 1(2)), which is in line with the Public Sector GPG Regulations. The original Regulations referred to employees who “ordinarily work” in Great Britain and whose contract is subject to UK law. Respondents to the consultation called for the definition to be that used in s. 83 of the EqA, which would include “workers” and this is the definition used in the Public Sector GPG Regulations. Mystifyingly, these Regulations now define an employee as ”a person who is employed by the employer” but the Explanatory Notes expressly state that the definition of employee is the same as in s. 83 and so will include workers but under reg. 1(4), will exclude partners in a firm. It is a pity that it does not say in the Regulations themselves. There is a new exception in reg. 2(3), namely that if (a) the employee is employed under a contract personally to do work, and (b) the employer does not have, and it is not reasonably practicable for the employer to obtain, the data. The Regulations also apply only to full-pay employees. This is not to be confused with part-time employees but refers to situations where an employee is on reduced pay.

Reg. 2 provides that the relevant employer must publish, for 2017 and each subsequent year, the following information—

(a) the difference between the mean hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees (see regulation 8);

(b) the difference between the median hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees (see regulation 9);

(c) the difference between the mean bonus pay paid to male relevant employees and that paid to female relevant employees (see regulation 10);

(d) the difference between the median bonus pay paid to male relevant employees and that paid to female relevant employees (see regulation 11);

(e) the proportions of male and female relevant employees who were paid bonus pay (see regulation 12); and

(f) the proportions of male and female full-pay relevant employees in the lower, lower middle, upper middle and upper quartile pay bands (see regulation 13).

The snapshot date is now 5 April, a change from 30 April in the original Regulations and again mirrors the Public Sector GPG Regulations. This means that the final reporting date will be 4 April in the following year.

 

Reg. 3(1) defines “ordinary pay” as (a) basic pay; (b) allowances (as defined in reg. 3(4)); (c) pay for piecework; (d) pay for leave; (e) shift premium pay. Interestingly, there is no mention of gross pay as there was in the original Regulations but it is assumed that it still means gross pay. Reg. 3(2) excludes “remuneration referable to overtime, (b) remuneration referable to redundancy or termination of employment, (c) remuneration in lieu of leave, or (d) remuneration provided otherwise than in money”. The omission of overtime is puzzling, given that it may be contractual and in any event, it may be paid at a discriminatory level. However, it is notable that leave pay now includes payments for recruitment and retention, although such payments may well be defensible as a material factor on the basis of market forces. It is also notable that in common with the Public Sector GPG Regulations, maternity, paternity and shared parental leave pay is included in the definition of pay – previously, it was only maternity pay.

 

Reg. 4(1) defines bonus pay as “any remuneration that (a) is in the form of money, vouchers, securities, securities options, or interests in securities, (b) relates to profit sharing, productivity, performance, incentive or commission.” Reg. 4(2) expressly excludes ordinary pay or any payment referable to overtime. The new wording eliminates the contradictory definitions of “received and earned” and “received” in the original Regulations. Reg. 4(3) also provides a definition of when these are deemed to be paid with reference to taxable liability under Part 2 of IETPA 2003.

 

The Regulations expressly now concentrate on determining the hourly rate of pay, which is the accurate comparison for the purposes of equal value, especially as many women work part-time. Regs 5-7 set out the exact methodology for calculating the pay and bonus pay. This is a substantial change from the original Regulations.

 

As with the original Regulations, the Regulations require the employer to give the mean and median hourly rate of pay. Reg 8 sets out the methodology of calculation for the mean pay and reg 9 sets out the methodology for calculating the median pay. Regs. 10 and 11 perform the same exercise for bonus pay. The requirement for publishing the median bonus is new to the Regulations and was not part of the original Regulations so the Government has clearly responded to the feedback in the consultation process. One or two high bonus earners could have skewed the mean figure. This change was foreshadowed in the Public Sector GPG Regulations consultation. As in the original Regulations, there is also a requirement for information concerning the proportion of men and women who receive bonus pay (reg 12). This is perhaps in response to the practice, widespread in pre-Single Status local authorities, of paying a “bonus” to male manual workers that was, in essence, basic pay dressed up as a reward for productivity.

 

Reg 13 of the Regulations provides that the information concerning gross hourly rates is to be placed into four quartiles, starting with the lowest (A) and ending in the highest (D). There does not appear to be a requirement to identify the financial limits of the actual quartiles. It also appears that the requirement is only for the numbers of men and women in each quartile - there is no need to provide their grades or pay bands within those grades. In the circumstances, it will be very difficult to ascertain any information that actually helps employees discover what the GPG is between them and their comparators. Whilst s. 78 envisaged that regulations could specify classes or employee, no such specificity is included in these Regulations despite calls for it in the two responses. In its reply to the Second Consultation, the EHRC suggested that the info about quartile should include female participation rates at the various levels of the organisation, the difference between median basic pay for men and women for different grades on the organisation, the median pay in each quartile (and in companies of over 1000 employees, each decile) and “the difference between men’s and women’s starting salaries as an hourly and weekly figure to clarify employers’ decisions on pay at recruitment and promotion”. Information of this type would have helped employees discover meaningful information about the GPG.

 

Reg 14 provides that the information is to be accompanied by a statement confirming that it is accurate, to be signed by a director or a partner in the case of a company or partnership/LLP respectively; otherwise, by the most senior employee. Reg 15 provides that it is to be published, in English, on the employer’s website and to remain there for 3 years and, in a new development, must also be published on a website designated by the Secretary of State (including the name and job title of the person who signed the accompanying statement). It remains unclear whether the Government will use this to create sector-by-sector league tables as was previously suggested, but this is a possibility. Reg 16 provides that the Secretary of State must “from time to time” carry out a review of the Regulations and publish the report setting out the conclusions. These Regulations have been a long time coming. However, they do not deliver information helpful to claimants and there is no enforcement. One hopes that the review, if and when it occurs, will highlight these issues but this particular writer is less than optimistic.

 

Daphne Romney QC specialises in equal pay law. Please call 0207 827 4000 to find out how Daphne or Cloisters can help you client.

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