As the deadline of 4 April 2019 for the second annual gender pay report looms, the last few months have seen a flurry of reports and guidance published by the Equality and Human Rights Commission (EHRC), the Government Equalities Office (GEO), the Business, Energy and Industrial Strategy Committee (BEIS Committee) and the government focussed on how best to close the gap.
Last year 100% of employers in scope reported their gender pay gap (GPG) data. Recent research commissioned by the GEO found that more companies have prioritised reducing their GPG and 69% of employers now view closing the GPG as a high or medium priority. So far, about 10% of employers have submitted their reports ahead of the April deadline. However, according to an analysis of those reports by the BBC on 19 February, four in ten companies have reported a wider gender pay gap compared to last year including Kwik Fit, Npower and Virgin Atlantic. It remains to be seen whether this is the pattern that emerges when the other 90% of employers submit their reports.
We look at the recent guidance, best practice for 2019 and the future of gender pay gap reporting.
Guidance and action plans
In December 2018 the EHRC published its report Closing the gender pay gap which was preceded by GEO guidance published in October 2018 Reducing the gender pay gap and improving gender equality in organisations – read more here.
The GEO published two further guides in February 2019. The first, Eight ways to understand your organisation's gender pay gap, looks at key questions to help diagnose the potential specific causes of an employer's GPG. It looks at potential areas for improvement from recruitment and promotion to through to termination and the steps an employer should consider where a gender balance is identified so that it can target resources more effectively.
The key questions include looking at:
- Whether people get "stuck" at certain levels by examining the employer's own organisational structure including their seniority structure.
- Whether there is a gender imbalance in the organisation's promotions by comparing the gender ratios of those that apply for promotion with the composition of men and women at the grade below.
- Whether women are more likely to be recruited into lower paid roles by looking at the proportion of women applying for positions and whether there are gender imbalances at different levels or grades.
- Whether men and women leave the organisation at different rates by looking at the percentages of men and women leaving each year by seniority level.
- Whether the organisation is doing all it can to support part-time employees to progress and to support both men and women to take on caring responsibilities.
The second guide Four steps to developing a gender pay gap action plan is based on feedback from employers with successful action plans. The four steps are:
- To analyse the data and identify actions by understanding why the organisation's GPG exists.
- To consult and engage by gaining buy-in from senior people and by involving a wide range of stakeholders.
- To revise, assess and embed the action plan by monitoring and evaluating it so that it can evolve and develop over time.
- To allow enough time for the process.
Best practice for 2019 gender pay reports
Employers who have not yet reported for April 2019 should ensure, prior to submitting their report, that it meets all of the relevant criteria under the GPG reporting regulations. A recent analysis of the reports uploaded so far this year by Paygaps.com found that almost a third had errors. The most common of these were administrative, for example, the reports not being signed by someone sufficiently senior and not providing the correct link to the report on the employer's website.
In addition, although there is no requirement to include an action plan, the government's approach through its guidance is to encourage employers to do so as the most effective way of tackling the gap and also to provide contextual narrative to explain the reason for any gap. The analysis by Paygaps.com found that so far this year there has been a 31% increase in the number of employers who have provided some context behind their pay gaps compared to last year. It therefore does appear that companies are recognising how important it is to explain any gaps that could otherwise give a misleading impression. The companies referred to in the BBC's analysis had explanations for the widening gap, in the case of Kwik Fit a number of senior female employees had left the company and for Npower the widening gap was attributed to more female than male employees opting for a salary sacrifice benefits scheme.
The future of gender pay gap reporting
The government's response to the BEIS report on strengthening GPG reporting was published in January and confirmed that at present, there is no proposal to change the GPG reporting regime. The BEIS report had called for more to be done, more quickly, to close the GPG and made a number of recommendations.
However, the government response states that the threshold will remain at 250 or more employees, there will be no amendments to require a more nuanced analysis of GPG figures and action plans will not become a mandatory part of reporting. The government is also satisfied with the EHRC strategy on enforcement and does not see the need to clarify its enforcement powers by providing for specified fines for non-compliance - read more on enforcement action taken by EHRC here.
Although there are no plans for an immediate overhaul, the government is under a statutory obligation to review the GPG reporting regime within five years of its introduction, so things may change in future.
In the meantime, there is no quick solution to closing a GPG. As we approach the second reporting date and beyond, employers who are serious about this issue should study the guidance and ensure they have an effective strategy in place to close their GPG. One thing is certain, the remaining reports will be scrutinised by the staff, clients/customers and the press for improvements and for explanations if there is little change or the gap has widened.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.