With the release of the final draft regulations for gender pay gap reporting, your Christmas gift list has just got a little bit bigger. It’s clear that to be able to comply with these regulations, you’re going to need some very detailed data and some friends in Finance and Management Information to help you get it.

I can’t help but feel the government has got carried away trying to clear the desk before Christmas with the release of the final draft regulations. While it gives some good clarity to some of the required elements, it’s left many scratching their heads trying to figure out exactly what the final reporting requirements are for their organisation.

The regulations will take effect from 6 April 2017, but also important to note is the ‘snapshot’ date i.e. the date which determines the period of pay you are reporting on, is now only four months away on the 5 April 2017. Companies with 250 employees or more will then have 12 months to publish their gender pay gap.

While ‘employees’ are not defined in the draft regulations, the explanatory notes state the definition of employment is the section 83 of the Equality Act 2010 definition. This definition would mean employees are those employed under a contract of employment, a contract of apprenticeship or a contract personally to do work. This crucially, therefore, would include many independent contractors. There is a caveat in the regulations that allows for those personally contracted to be excluded where the employer does not have the data or cannot practically obtain it.

The regulations do clarify exactly what figures need to be reported, as well as detailed notes on how to calculate them. The regulations confirm there are now six sets of figures to report, with the inclusion of median bonus in addition to the mean bonus previously stated. They are:

1. The percentage difference in mean hourly pay between male and female employees on the snapshot date.
2. The percentage difference in median hourly pay between men and women on that date.
3. The percentage difference in the mean bonus between men and women in the previous 12 months
4. The percentage difference in the median bonus (this has been added in since the original proposals) between men and women in the previous 12 months.
5. The percentage of men and the percentage of women who received a bonus (which must also be expressed as a percentage) in the previous 12 months.
6. The percentage of men and women in each hourly rate pay quartile, split evenly across the workforce, reported by upper, upper middle, low middle and lower bands.

A key change to the calculation of hourly pay figures, is that employees on leave where their pay drops below normal levels, are now excluded. For example, employees on maternity or sickness absence not at their full pay equivalent level, would not need to be included. However, if your policy tops up maternity or sickness pay during the pay reference period* to full pay levels, employees would need to be included. It’s not as simple as excluding anyone absent from the organisation.

Bonus payments paid in the pay reference period* must also be included in the hourly pay figures, but there is now a requirement for these bonus payments to be pro-rated based on their qualification period. The definition of bonus has been also clarified, now stating that pay in the form of securities, securities options and interests in securities, is included at the time and at the value of when it is taxable earnings.

Now I know what some of you are thinking; they can’t do anything to make us. Well, the government has closed that loophole, making it an ‘unlawful act’ to not comply. This means the Equality and Human Rights Commission can take enforcement proceedings against anyone it feels hasn’t fully complied with the regulations. It’s likely that in the first instance, we’ll see ‘naming and shaming’ tactics, like the government has employed for the national minimum wage, before tougher sanctions are imposed.

If you weren’t already planning and pre-running your gender pay gap analysis, the latest regulations make it clear that you don’t have time to sit and wait. You need to start mining your data sources and checking you have all the data you need. As we’ve previously spoken about, the figures are only the first step. It is taking control of what’s behind the headline figures, and creating a narrative around the figures, that will ensure you demonstrate your stance on gender equality.

Let’s not forget though these regulations, while cumbersome and complicated, are trying to force action on an issue that without intervention would continue largely unchanged. The government states, “it has been estimated that further bridging the UK gender gap in work has the potential to create an extra £150 billion on top of business-as-usual GDP forecasts in 2025,” as well as just, “being the right thing to do.” Hopefully, these regulations will increase awareness of the issues and force organisations to shine a light in to dusty corners and tackle gender pay discrimination head on, rather than face the prospect of losing talent and reputational damage.

* The 'relevant pay period' means the pay period within which the snapshot date falls. It is the period in respect of which the relevant employer pays the employee basic pay, whether weekly, fortnightly, monthly or any other period.

Get in touch to find out how we can help you prepare for gender pay gap reporting: 020 3457 0894

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