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Mandy Laurie

Dundas & Wilson

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Legal Insight: Tackling gender pay gap reporting

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The recent settlement of the long running saga of Gibson and Others v Sheffield City Council, otherwise known as the ‘dinner ladies’ case, highlights the limitations of the UK’s equal pay legislation.

After 40 years of being in force, we are still seeing test cases, where legal issues relating to whether workers are entitled to a bonus or not are enormously complex. The public sector has been involved in defending mass litigation in this area for over a decade and the matter is still far from resolved.
 
In contrast, however, the private sector has so far largely avoided the issue. For years, private sector employers have been warned that it is only a matter of time before equal pay claims become a problem for them too.
 
But despite these warnings, very little progress has been made. The Chartered Management Institute‘s salary review, published at the end of August, for example, predicted that equal pay for women executives was almost 100 years away.
 
So why have claims for equal pay been made almost exclusively by public rather than private sector employees? There are a number of reasons for this scenario, but the most obvious is the lack of pay transparency within the private sector. 
 
In the late 1990s, trade unions and local government employers entered into a single status agreement to apply a single pay structure to all local authority employees. Job Evaluation Studies were to be carried out by local authorities and a similar grading and pay review process was conducted by the NHS.
 
Limitations
 
The upshot of both exercises was that Council and NHS employees had greater insight into how their pay compared with that of their colleagues. Equal pay claims ensued as a result, and no-win, no-fee law firms sprang up to support and drive the mass litigation that emerged.
 
But no such pay grading exercise or requirement to publish pay statistics has ever been required of the private sector. This means that many private sector employees do not know how their pay compares to colleagues’ as their employers are not compelled to disclose it.
 
There is also an undeniable culture of not discussing pay within the private sector, which does not exist (at least to such a degree) in the public sector. As a result of the Equality Act, however, employers can no longer ban pay discussions if the reason for that discussion is to establish whether differences in pay are (among other things) because of gender. 
 
Realistically this change will only have a limited impact since the discomfort in talking about how much they earn felt by many employees is a cultural one based on feeling awkward rather than on any contractual prohibition. 
 
Perhaps it is in recognition of the limitations of individual litigation that last month the Government unveiled its plans for private sector employers to report on the gender pay gap in their organisation via the Think, Act, Report initiative. This scheme, targeted at employers with more than 150 staff, is definitely a step in the right direction.
 
The idea is to encourage employers to take a step-by-step approach to thinking proactively about gender pay and, over time, to report on the pay gap within their own organisation. According to the Government’s research, 43% of companies already undertake some form of gender pay analysis, but very few report this information publicly.
 
Gender pay reporting
 
The Think, Act, Report initiative provides different options for employers as some will already have established equal pay monitoring systems, whereas others may be looking at the issue for the first time.
 
One inevitable concern is that gender pay reporting will lead to an increased risk of equal pay litigation. But this belief is to confuse the gender pay gap issue with the unequal pay one. The two are related but distinct issues.
 
Simply because an employer has a gender pay gap does not inevitably mean that it has breached equal pay legislation. A gender pay gap may be caused by a variety of factors, including part-time working, career breaks or occupational segregation, which are not necessarily tainted by unlawful gender discrimination.
 
That is why it is critical for employers to take time to explain why a gender pay gap exists. If any findings raise concern, then legal advice should be sought before publishing either them or an explanation for the differential.
 
But, unlike the Government’s other proposal, which is contained in the recent consultation on Modern Workplaces, at least the Think, Act, Report initiative seems to offer real solutions.
 
The Modern Workplaces proposal, on the other hand, suggests introducing equal pay audits among those employers that have been unsuccessful in defending equal pay claims at tribunal. The problem here is that some employers may simply settle a case to avoid having an equal pay audit forced upon them.
 
Taking action
 
What is clear, however, is that the combined effect of these proposals will lead to a renewed focus on equal pay and reporting gender pay gap information. So how should HR directors prepare?
 
  1. Employers starting to undertake a gender pay analysis are recommended to consider the ACAS guidance on voluntary gender pay reporting.
  2. If new to the area, it would be sensible to start at a basic level and work towards reporting across a number of criteria. The type of approach taken will inevitably be affected by company size and resources.
  3. Employers can choose to report on the following:
  • Narrative measures – this comprises a description of the organisation’s approach and actions in order to provide context for any figures reported
  • Workforce measures – these include the gender composition of the workforce as a whole or how women are represented at different levels of the organisation
  • Pay measures – these include the overall gender pay gap, full-time gender pay gap or men and women’s starting salaries
  • Employers should also benchmark their figures against appropriate industry data.
 
It will be interesting to see how many employers sign up to the new Think, Act, Report scheme, although hopefully momentum will gather and produce results. As ACAS optimistically says in the introduction to its guide – "What gets measured gets done."

Mandy Laurie is a partner in the employment team at UK law firm, Dundas & Wilson.

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Mandy Laurie

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