Gender Pay Regulations and their application to group companies

Posted on January 16, 2017

Close the gap!

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations), due to come into force in April 2017, will make it compulsory for companies with over 250 staff to report publicly on the gender pay gap within their organisations. The intention is clear: companies must close the gap!

What about Group and multinational organisations?

During the recent government consultation on the draft Regulations, the government was asked to clarify how the reporting requirements would affect group and multinational organisations that have multiple UK companies.

The government's response

The government's response to the consultation (the Response), published in December 2016, dealt with this issue by confirming as follows.

The reporting requirements will apply to each separate legal entity (i.e. the employer) with at least 250 employees within a group structure.

The government agrees with the proposal put forward by PWC in the consultation:

"If a group of employers feel that disclosure on an entity basis may be misleading, an option would be for voluntary disclosure of gender pay gaps across the wider group, in order to provide context to the results for each employing entity."

The government regarded PWC's proposal as a "sensible and proportionate approach" and confirmed that it "will be reflected in the [government] non-statutory guidance. "... corporate groups will be encouraged to disclose gender pay gaps across the wider group on a voluntary basis [despite separate entities employing less than 250 employees] if their senior leaders, board members and shareholders consider that informative and appropriate".

Additional guidance for companies

The government has promised to give support to help employers calculate and address their gender pay gap. The Response promises (see page 5):

"A campaign of myth-busting UK-wide events and multimedia guidance to help employers calculate their gender pay gap, gender bonus gap and the numbers of men and women at different pay quartiles.

Targeted support for smaller employers, and those in sectors that are least advanced on gender equality (e.g. STEM).

Share best practice of exemplars through Think, Act, Report, and a report on the trailblazing action many businesses are taking to tackle the pay gap was published in February."

When will the Regulations be in force?

Subject to the approval of both House of Parliament, the Regulations will come into force in April 2017.

Fines for failing to comply with the Gender Pay Regulations

Companies failing to comply with the new reporting requirements under the Regulations could face a fine in the region of £5,000. The government has indicated in its latest response that it will monitor compliance of the Regulations carefully to ensure that the measures in place under the Regulations are effective in practice. Companies cannot afford to be complacent.

Dealing with the changes

The government is committed to making these gender pay reporting changes in the workplace to ensure better pay transparency, diversity and increased wages for women. The Regulations are a big step forward towards this goal and have been widely welcomed.

As we explained in our article in Spring 2016, companies should be aware that if their compliance with the Regulations reveals an adverse gender pay gap, there could be difficult implications for their businesses, including:

negative publicity and reputational damage;
difficulty attracting new staff or retaining staff;
a negative effect on procurement processes; and
equal pay claims for damages from employees which could date back more than six years.

Close the gap!

Companies who fall within the ambit of the Regulations should review their pay roll to check for discrepancies in pay between male and female staff undertaking the same or similar work. If such discrepancies are found, steps should be taken to close the gap. In the first instance, companies should issue a statement explaining the gap and what action is being taken to close it.

Subsidiaries of group companies who employ fewer than 250 employees will not be caught by the Regulations. However, senior managers in the Group should consider carefully whether to make a voluntary disclosure of the gender pay gap in line with the PWC proposal (above).

The government wants "senior leaders within each employer to have a strong sense of ownership of the published figures and the subsequent remedial action to close any identified pay gaps."

Contact

For advice and support on the gender pay gap reforms and how to minimise the risk of an equal pay claim, contact Susan Mayall on 0161 684 6948 or make an enquiry.