Gender Pay Gap Regulations

20-12-2016

After a long wait, the final draft of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the “Regulations”) has been published, together with an explanatory memorandum. The Regulations set out how employers should calculate and report on the gender pay gap within their organisation; these come into force on 6 April 2017.

To recap, the key obligations introduced by the Regulations can be summarised as follows:

A number of important changes have been made following the consultation on the previous draft published in February 2016. In particular (these changes are expanded upon below):

The first gender pay gap reports (in respect of April 2017 pay data) will be due by 4 April 2018 and must be published for three years on the employer’s website and a central government website.

The definition of “relevant employee”. The definition of “relevant employee” has been amended, now providing that a relevant employee is “a person who is employed by the employer on the relevant snapshot date”. References in the earlier draft to orginarily working in Great Britain and working under a contract governed by UK legislation have been removed. This is significant as it potentially covers many self-employed workers who are engaged directly by employers as consultants, independent contractors and so on.

The removal of the express provision limiting the definition of relevant employee to those ordinarily working in Great Britain under UK law may cause complications for UK employers with employees based overseas.

Partners (including LLP members) are excluded.

Employees are now excluded from the pay reporting obligation if they receive less than full pay as a result of leave. This has been achieved by adding a definition of “full pay relevant employee” which is a “relevant employee who is not, during the relevant pay period, being paid at a reduced rate or nil as a result of the employee being on leave”. Only full pay relevant employees are taken into account on the snapshot date for the calculations relating to mean and median hourly rates of pay, or the proportion of male and female employees in each quartile. However, all relevant employees are included in the bonus figures. This aims to address the concern that the gender pay gap could appear greater if the employer had a significant number of employees on statutory maternity pay or unpaid maternity leave on the snapshot date.

The snapshot date. This has been changed from 30 April to 5 April. The explanatory memorandum states that 5 April has been selected in order to “reduce the extent to which employers need to collate data from more than one tax year”. This logic seems questionable; choosing the last date of the tax year ought to make it more likely that the relevant pay period will straddle two tax years.

New exception to pay data. This appears to be designed to help where it would be difficult to obtain pay data for some workers, as may be the case with independent contractors who do not work fixed hours and are not paid through the payroll. There is no need to include data relating to an employee who has a contract personally to do the work, if the employer does not have such data and it is not reasonably practicable to obtain it. It seems that all employees within the broad definition will count towards the 250-employee threshold, but actual data may not need to be included for some those employees. There is clearly scope for argument about what “reasonably practicable” means in this context, particularly if an employer is keen to exclude male-dominated and/or highly-paid contractors from its statistics.

What is included within “pay”?

There is now an exhaustive description of ordinary pay, which means:

Bonus data. There is a new requirement to publish the difference in the median bonus pay figure in addition to the mean figure (bringing this into line with the position for the hourly pay gap).


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