Reporting requirement will shed new light on pay gaps that employers will need to explain adequately to staff, writes legal expert Joseph Lappin

The government’s failure to tackle the root causes of the gender pay gap in the UK was criticised recently by the Women and Equalities Committee. The condemnation came despite the introduction of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, which require businesses employing more than 250 employees to measure the difference in male and female pay and bonus pay from April 2017.

The Office for National Statistics (ONS) began measuring the gender pay gap in 1997, when it stood at 27 per cent. Despite falling year on year, there remains a large gap between average male and female pay: in November 2015 it stood at 19.2 per cent. Women account for 47 per cent of the workforce but, on average, for every £1 earned by a male employee, a woman earns just 81p. Men are disproportionately represented in the best-paid sectors and many employers, particularly in the private sector, have failed to create working environments in which women can secure promotion to the most senior roles. The Equality and Human Rights Commission (EHRC) reports that the “higher the proportion of women who work in an occupation, the lower the average pay, [which] suggests that work with a higher proportion of women is economically devalued”.

The government’s clear intent with the gender pay gap reporting regime is to encourage employers to address pay inequality. Many large companies do not know what their gender pay gap is. The reporting requirements will force firms to review payroll data and identify where they have a gender pay problem. Companies need to publish their pay gaps on their own websites and on a government website. Many will be anxious about their gender pay gaps being scrutinised by the public and the media, and the resulting potential reputational damage. Employers will also be concerned that the new reporting regime will lead to an increase in equal pay claims being brought by employees.

Equal pay vs gender pay gap

There are similarities between gender pay and equal pay but the two issues are different. While gender pay gap reporting is a new phenomenon, the Equal Pay Act dates back to 1970 when employers openly rewarded men more generously than women for performing the same job. Equal pay law, now enshrined in the Equality Act 2010, seeks to achieve equal pay for equal work by men and women by implying a sex equality clause into a female employee’s employment contract to replace less favourable terms with the equivalent more favourable terms of a man’s contract. While gender pay gap reporting captures pay differences between men and women across the business at all levels of seniority, equal pay concerns individuals or groups of staff performing the same work or comparable work. Although it is possible for employers to have a gender pay gap even if they have sound equal pay policies, the gender pay reporting regime will shed new light on differences in male and female pay.

With the introduction of gender pay reporting, employees are more likely to discuss the issue of gender pay openly with colleagues and managers, particularly if a sizeable gender pay gap exists at their organisation. Female members of staff might seek an explanation from their employer for the existence of a pay gap and might investigate the causes of any pay difference with male staff. An employment tribunal ruled in an equal pay claim last year that women, who work on the shop floor at a UK retailer, can compare their jobs with those done for a higher wage and predominantly performed by men in the retailer’s warehouses. Gender pay gap reporting could result in similar divisions of pay being revealed at other organisations, and employers could be forced to defend paying higher wages to staff performing roles predominantly performed by men in an equal pay claim brought by women overrepresented in lower-paid roles which they argue is equal work.

The critical learning point for employers is to prepare for the effects of increased transparency, and for the communication it will necessitate. Employers should invest time in considering how they will communicate their gender pay gaps to employees and the messages they might want to deliver to staff. Female employees will feel aggrieved if a large pay gap exists and so it is vital that employers explain the reasons for the gap and clearly outline any strategy that will be put in place to address gender pay inequality. Employers who go the extra mile might consider running webinars or face-to-face seminars to talk to their staff about the results of reporting, why a gap might exist, and the plan they will put in place to narrow it.  Employers who fail to address gender pay inequality and fail to engage with staff on the issue are more likely to face pay claims than those that do.

Joseph Lappin is a solicitor in the employment department at Stewarts Law LLP

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