Hot on the heels of announcing a rise in the national living wage, we now see Government championing equal pay in the UK workforce.
Measures were included in the Small Business, Enterprise and Employment Act 2015 that will give effect to the provisions in the Equality Act for the Government to introduce mandatory gender pay gap reporting as businesses have failed to take the initiative and do this voluntarily. David Cameron has announced the commencement of a public consultation exercise that will run until 6th September, which will help to inform the design of the regulations including the extent of the information that businesses will be required to publish, where it should be published and how often.
Who does it apply to?
The new regulations will apply to the 7,000 businesses in the UK that employ 250 or more people. They will primarily impact organisations in the private and voluntary sectors as those in the public sector are already bound by the public sector equality duty.
What might be required?
The options range from requiring employers to publish a single figure that compares the average hourly pay for males with that for females to a requirement for employers to conduct a full, ‘drains up’ equal pay audit. The first option may be tempting as the information should be relatively easy to produce. However, businesses need to consider this carefully as too simplistic an approach may well cause more problems than it solves as a single figure is likely to be of little value and could actually be misleading. By the same token, the majority of employers may view full equal pay audits as too onerous even assuming that the data required is readily available. The likelihood is that the detail of the regulations will fall somewhere between these two extremes although exactly where is difficult to say at this stage. Once the regulations are published it will be for businesses to decide whether they simply do enough to comply or whether they wish to do more, such as providing contextual explanations of any gender pay gap.
One thing that is clear is doing nothing is not an option. Businesses will need to have some arrangements in place in order to satisfy the requirements of the regulations when they are drawn up, which is likely to be in the first half of 2016.
What needs to be done?
In the absence of the detail of the regulation there are some preparatory steps that businesses can take now and these include:
- Conducting an equal pay audit to identify the gender pay gap, potential equal pay risks and developing a strategy to address them.
- Reviewing the current pay arrangements to ensure that these are properly understood by both managers and staff.
- Identifying potential risk areas, eg historical pay arrangements for particular groups of staff, work groups that are predominantly male or female and which are subject to different pay arrangements.
- Reviewing the types of information that are typically required for equal pay reviews and assessing the accessibility of the data through the HR and/or payroll systems.
Why do you need to do anything?
Some employers may be unaware that they even have a gender pay gap until they analyse their pay information. The consequence of this is that they are unknowingly carrying a level of risk to the business, which depending on the circumstances, could be significant. Similarly any employer who decides not to look at the gender pay gap unless or until they are challenged carries the same level of risk.
There are other employers who may be concerned that looking at the gender pay gap could expose them to equal pay claims. This may be a real concern, but it is a poor reason for doing nothing about it – ignoring the problem will not make it go away and could exacerbate it. Instead, taking a proactive stance gives businesses the opportunity to identify and take steps to mitigate the risks in a managed way.
Most employers recognise the need to attract and retain the best people. Identifying and addressing any gender pay gap will mean that the value of women in employment is better recognised and increase the potential talent pool. This also has implications in terms of productivity.
Failure to comply with the new regulations when they come into force is likely to result in sanctions including fines. However, the greater penalty for businesses found to have infringed the regulations is likely to be reputational damage and adverse publicity. The knock on effects of which could be serious as it will attract the attention of the media, no-win no-fee lawyers (looking to generate equal pay claims) and trades unions.
To conclude, businesses that embrace this change now will be best placed to meet the challenges that the new regulations will present. It is important that this is not seen simply as another box-ticking exercise.