One of the last gasps of the Coalition government was a commitment to bring into force section 78 of the Equality Act 2010, requiring employers to publish gender pay gap data. With regulations originally due to be effective from March 2016, a markedly vague consultation paper in July 2015 followed by a long silence did little to dispel the impression that this had been something of a reluctant concession to a long-gone coalition partner. Now that we have the draft regulations, are they the damp squib that some campaigners feared?
In fact, they seem to offer the worst of both worlds: a regulatory burden which in many cases will be no more than an exercise in number-crunching and will do little to address (or even illuminate) the causes of pay inequality.
The draft regulations will require employers with 250+ employees to publish the following information, calculated using figures from the whole organisation:
- The difference between male and female employees’ mean gross hourly pay, expressed as a percentage of male employees’ mean gross hourly pay.
- The difference between male and female employees’ median gross hourly pay, expressed as a percentage of male employees’ gross hourly pay.
- The difference in male and female employees’ mean “bonus pay” (broadly defined to include profit share, share awards and long-term incentive plans or schemes).
- The proportion of male and female employees who received bonus pay during the preceding 12 months.
- The numbers of male and female employees in each of four salary quartiles.
The reporting requirements are straightforward, although practitioners will note with interest indications given by the Government Equalities Office that “employees” for these purposes includes anyone “in employment” for the purposes of the Equality Act 2010 (so including workers, LLP members, and so on). That approach, coupled with the broad definitions of “pay” and “bonus pay” could result in very different remuneration structures being treated as comparable for the purpose of calculating the pay gap and bonus gap.
But perhaps what’s most notable is what’s missing from the draft regulations. They don’t require, for example, any comparison of the pay of part-time and full-time staff or of the number of men and women working part-time, nor any breakdown of pay gaps by age, grade or seniority beyond the rather blunt tool of the salary quartiles. Instead they focus primarily on comparisons of hourly pay. As a result, potent factors in pay disparity risk being obscured. The national gender pay gap widens considerably after the age of 40; in many cases women’s pay stalls or even regresses after 40. Women are also more likely to work part-time and so earn less. In both cases, caring responsibilities may play a significant role. The professed purpose of the section 78 is to help employers understand any pay gaps, but the narrowness of the data set means that employers could easily be led down blind alleys. While there’s nothing stopping organisations publishing (or at least analysing internally) more detailed statistics, the lesson of the voluntary “Think, Act, Report” framework is that few businesses volunteer for additional burdens – and many will rightly be cautious of producing statistics which could be cited against them in a discrimination or equal pay claim without a legal obligation to do so.
Neither do the draft regulations require that employers explain any gaps or outline how they plan to address them (although they can provide an optional explanatory narrative including this information). By contrast, France, Sweden, Belgium and Finland, which have similar data reporting requirements, also require large employers to produce action plans to tackle any disparities. If the purpose of the regulations is to encourage employers to take action and create a culture of transparency, this omission looks like a missed opportunity, and sits rather uneasily with the government’s stated intention to collate the data centrally and publish pay gap “league tables” for specific sectors. Perhaps the intention is that consumer and campaigner pressure, bolstered by the league table data, will result in employers taking such action voluntarily. The Living Wage Foundation’s campaign offers an example of how that can be achieved. However, the gender pay gap is arguably more complex and multi-faceted than the issue of low wages, so consumer pressure may be a less effective way of securing changes.
The narrow scope of the data analysis and the lack of a requirement for remedial action contrasts starkly with the more holistic approach of the “Think, Act, Report” scheme. That scheme, although dogged by low take-up, had the benefit of encouraging employers to examine the causes of pay differentials and under-representation of women at senior levels.
No doubt the government is wary of imposing undue regulatory burdens on employers, but these draft regulations look like a halfway house which benefits neither employer nor employee. The concern is that by reducing complex issues of career progression and pay inequality to a statistical analysis exercise, the proposed regulations will divert energy and resources from more productive ways of addressing low pay and under-representation of women in senior roles and high-paid sectors.
