Chairs in cafeteria

Facing the cold splash of reality and mandatory reporting on the gender pay gap: what's next for UK employers?

07 September 2015. Published by Kelly Thomson, Partner

As one of Enid Blyton's characters in Five Have a Mystery to Solve, exclaimed:

"Nothing like having a bucket of cold water flung over you to make you see things as they really are!” No doubt, when the government rolled out Think, Act, Report in 2011 and asked businesses to report voluntarily their gender pay gap and were faced with near silence in response this quote will have rung true.

Despite the government's efforts to ensure that employers are upfront and transparent around any gap between what they pay male and female employees on average, an overwhelming majority of companies didn't publish voluntarily.

By November 2014 only five companies had published their gender pay gap.   The absence of a will on the part of the private sector to engage threw a spanner in the government's plan to let the onus rest voluntarily, as was the case with board diversity, on the shoulders of the business community. This, however, begs the question: why did 99.03% of Britain's companies choose not to report?  A survey by IFF Research of 855 voluntary and private sector organisations, which found that 13% of the respondents would only engage with a gender pay review, if forced by legislation would not have helped.

Realistically, it could boil down to a combination of cost, complexity, systems incompatibility and fear of the unknown.  For some, perhaps their gaps are so large they fear being lynched by the media, losing their attractiveness as an employer and drowning in complaints and claims.  For others, there is a sense that this is not an issue for them – often based on the misunderstanding that the gender pay gap is about equal pay: it isn't.  The gender pay gap is broader than whether you pay a woman the same as a man in a comparable role.  It is a measure, albeit possibly a simplistic one, of female progression.  A large gender pay gap may not mean that you are paying any individual employee unequally on grounds of sex – but it might mean that you have few senior women.

So the voluntary method is clearly not working, and as a consequence of that lacklustre response, the government dried itself off and made a manifesto commitment (after much cross-party pressure) to implement s78 of the Equality Act 2010 to make reporting the gender pay gap mandatory for larger companies. While draft regulations are not expected until the 'winter', early indications suggest that at least some companies could be expected to start reporting as soon as 2016 though the government is consulting on timings.  

What do these new measures mean for General Counsel not only as the legal adviser to their business as employer; but also as managers of teams of legal and non-legal staff?

As the consultation closed yesterday, so much of what is to be expected from employers is still in the dark.  As is often the case, there may well be further consultation after this round.  Much depends on the granularity of the data you are required to publish and the ability to support those statistics with an effective narrative. Myriad issues will need to be considered not just by the business but more specifically by the legal and management team, including cost implications, impact on internal systems, and most importantly the legal and reputational implications of not complying or of publishing a large gap and its impact on internal and external perceptions of the organisation.

Compliance in some form is going to be essential and, even if any civil enforcement penalties are not material to large employers, the reputational impact should be enough to focus corporate minds on the need to properly manage both the reporting and, more crucially, what the reporting brings to light. 

So GCs should start encouraging their management to start preparing to report and to resolve (or simply explain) any issues that are identified in that reporting now.

The coming months will reveal further details on what data employers should be expected to provide, when, where and how. With the current question marks hanging over the extent to which employers will be required to delve into the details of their pay gap, ie an overall figure, full-time/part-time figures, figures by grade/role.  And where this information is to be published is also up for grabs. Is business going to be required to post the information on the website or in annual accounts?

What is certain is that planning and budgeting for the implementation of s78 should start now, and GCs should start to arm themselves and their management with the necessary know how, so that when employees and the board start to ask questions, they are prepared.  Organisations with 250 or more employees should plan for the change in their next budget year at worst and within their current three to five year business plans at best, so that when the government's splash of cold water comes in 2016, they best armed themselves against drowning.