Daphne Romney QC considers how the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016, published last week by the Government, will affect businesses.
On 12 February 2016, the Government published the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016, which will affect some 8,000 businesses. This means that it finally implemented s.78 of the Equality Act 2010 (“EqA”), the section enabling the Secretary of State to make Regulations concerning equal pay audits. (The gender reporting implemented by these Regulations is not be confused with the compulsory audits ordered by ETs under s. 139A of the EqA). Section 78 was shunted sideways in 2010, then revived following pressure from the Lib Dems in the Coalition and Mind the Pay Gap, the campaign launched by Grazia magazine. And you thought Grazia was all about clothes and celebrities…
The Regulations will come into force in October 2016. Reg. 9 provides that the information must be published in English on the relevant organisation’s website and remain there for 3 years, also intended to shame employers into action although the first reports will not be required until April 2018 and, thereafter, annually.
This gives employers 18 months to prepare themselves. Some commentators and MPs have expressed disappointment at this delay. The Equal Pay Act 1970 also had a 5 year lead in to allow employers to put their house in order. 46 years (and over a decade of public sector litigation) later, the figures demonstrate that the gender pay gap persists. In its 2015 consultation paper, Closing the Gap, the Government disclosed that the overall gender pay gap was 19.1%. For full time workers, the gap was 9.4%; for part time workers, it was 5.5% but far more women work part time and at a lower wage. Of course, lower pay also means a lower pension; the startling statistic is that of those who retired in 2015, pensions for women were worth 25% less than for men.
The Regulations provide that employers with 250 or more employees must publish on their website the information set out in reg. 3. The thinking behind this is that the employers will have to disclose any pay inequality inherent in their business and will be prompted to eliminate it.
The information concerns:
- The difference in mean pay between male and female employees (expressed as a percentage of mean male pay (reg. 4)
- The difference in median pay between male and female employees (expressed as a percentage of median male pay (reg. 5)
- The difference in bonus pay between male and female employees (expressed as a percentage of mean male pay, as well as the proportion of male and female relevant employees who received bonus pay (reg. 6)
- the numbers of male and female relevant employees employed by the relevant employer on the relevant date in quartile pay bands A, B, C and D (see regulation 7)
s. 78 of the Act provided that information could include descriptions of employees, but this has not been provided for in the Regulations and so will not enable employees to identify exact comparators in rated as equivalent or equal value claims.
Reg. 2 includes “basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances)”, but not overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits. The omission of overtime pay is interesting in that rates may be set differently according to predominantly male and predominantly female jobs; similarly benefits in kind is also a curious omission, as they may be discriminatory.
Regs. 4 to 6 provide that the employer must provide details about the mean, median and mean bonus pay for its male and female employees set out as a percentage of the man’s pay. Reg. 1(2) defines the mean as “the sum of all values in the list divided by the number of values”, whilst the median figure looks for the middle figure and is less likely to be skewed by high or low earners. The mean bonus figures are based upon the difference between those who do and do not receive bonus (reg. 6(1)) but the employer will also be required to publish the percentage of men and the percentage of women who actually receive bonus (reg. 6(2)).
Reg. 7 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). The first information is to be calculated on the figures from April 2017. April has been chosen because it avoids seasonal fluctuations.
Reg. 8 provides that the information in reg. 3 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. Whilst s.78 provided that the Regulations could impose penalties either for failure to comply, the draft contains no such provision, although the Government is said to be considering whether defaulters should be publicly “named and shamed”. Meanwhile, an ET could presumably draw adverse inferences from either no, or false, published information.
Following the abolition of discrimination questionnaires, employees may have some insight into the pay differential between men and women, although not into the specific differentials. The former Equalities Minister, Maria Miller, has criticised the Regulations as unlikely to bring about equality and has indicated that the Parliamentary committee she chairs is to make proposals about practical improvements to gender reporting. Perhaps she will contribute to the consultation, which ends at midnight on 11 March 2016.
Cloisters has significant expertise in advising and representing clients in relation to equal pay. Please contact our clerks for further assistance.