The Gender Pay Gap Regulations FAQs – private and public sector

1.      What are the Gender Pay Gap Regulations?

There are two sets of regulations, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the GPG regulations) which apply to employers in Great Britain (excluding certain public authorities) with at least 250 employees and the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 (the GPG Public Sector regulations), which apply to specified public authorities with at least 250 employees.The GPG regulations come into force on 6th April 2017 and the GPG Public Sector regulations come into force on 31st March 2017.

 

2.      What is the aim of the regulations?

The regulations impose requirements for employers to report on the gender pay gap within their organisation. Employers must publish the average (mean and median) hourly pay gap between men and women based on the pay period containing a specific date (the ‘snapshot date’), expressed as a percentage. For this purpose, pay includes any bonus that has been paid in that relevant pay period.

 

3.     What is meant by average figures?

Both the mean (ie the average calculated by adding up all of the numbers and dividing the result by how many numbers were in the list) and the median ( ie the average calculated by listing all of the numbers in numerical order and identifying the middle number (or the mean of the two central numbers if there is an even number of results) are required.

Mean averages alone can present a distorted picture where, for example there are a disproportionality large or small number of highly paid or lowly paid employees.

 

4.     When is the ‘snapshot date’?

For the private sector, the snapshot date is 5 April. The first snapshot date for calculation is 5 April 2017 and employers are required to publish data on their website by 4 April 2018 and thereafter annually (regulation 1).

 

5.      What is the ‘relevant pay period’?

The relevant pay period means the pay period within which the snapshot date falls. The pay period means the period in respect of which the employer pays the employee, whether weekly, monthly or otherwise (regulation 5). A month is treated as having 30.44 days and a year is treated as having 365.25 days (regulation 6).

So, for example, where employees are paid weekly, the employer must use the weekly salaries paid in the week of 5th April to calculate the figures to be published.

 

6.      What do the GPG regulations require?

A relevant employer (with 250 or more employees on the snapshot date) must publish on its website the difference between the average hourly rate of pay paid to male and female employees on the snapshot date; the proportions of male and female employees who receive bonuses in the year to the snapshot date; and the relative proportions of male and female employees in each quartile pay band of the workforce on the snapshot date. The information must remain on the website for at least three years. The information must be accompanied by a written statement confirming the report’s accuracy, which must be signed by a director, member of an LLP, partner in a partnership, member of the governing body or otherwise the most senior employee(regulation 2). Full details of the reporting requirements are set out in the table below.

 

7.      Who is in scope?

The reporting obligations apply to relevant employees who are employed on the snapshot date (see 4 above). Under the Equality Act 2010, ‘employed’ includes employment under a contract of employment, a contract of apprenticeship or a contract personally to do work (hence it will include workers and part-time employees). The regulations specify that the information to be published is only about ‘relevant employees’ so partners are excluded.

 

8.      What if information about pay is not available?

If the employer does not have access to data about pay and it is not reasonably practical for it to obtain the data then there is no obligation to report (regulation 2). The Acas guidance (see 19 below) states that where an employer does not hold the data, ‘they should consider whether it is reasonably practicable to obtain it, for example by asking the person so employed’.

 

9.      Are employees on reduced pay included?

Only employees on full pay should be included in calculating hourly pay rates (regulation 2). Hence, for example,an employee on unpaid leave or SMP would be excluded from the calculations.

 

10.   How do you calculate hourly pay?

  • Calculate ordinary pay (see 12 below) plus bonus (see 11 below) for the relevant pay period (see 5 above)
  • Multiply by the ‘appropriate multiplier’. This is 7 divided by the number of days in the relevant pay period.
  • Divide by the employees weekly working hours. ( Where an employee does not have normal working hours, regulation 7 sets out how to calculate the figure to use)

So, for example an employee works 40 hours per week, is paid every 14 days and earns £500 in the week containing 5th April 2017. The calculation of his/her hourly pay is (500x 7/14) /40 = £6.25

 

11.  Does the ‘hourly rate of pay’ include bonuses?

If the bonus is paid in the relevant pay period (see 5 above) the hourly rate of pay will include that bonus although it will be pro-rated if the period in respect of which the bonus is paid is not the same length as the relevant pay period.

 

12.  What constitutes pay?

Ordinary pay is defined in regulation 3 to mean basic pay; allowances; pay for piecework; pay for leave; shift premium pay. It does not include overtime pay, redundancy or termination pay and is calculated after any deductions under a salary sacrifice scheme.

 

13.  What constitutes a ‘bonus’?

A bonus is widely drafted in regulation 4 to include any remuneration that:

a)     is in the form of money, vouchers, securities, securities options or interests in securities

b)     relates to profit sharing, productivity, performance, incentive or commission.

A bonus does not include ordinary pay, remuneration referable to overtime, or remuneration referable to redundancy or termination of employment.

For the purposes of bonus paid under (a) above, such remuneration is to be treated as paid to the employee at the time and in the amounts in respect of which the securities etc give rise to tax.

 

14.  How do we calculate the bonus GPG?

Under the previous draft regulations only the difference in mean bonus needed to be reported. The final regulations require relevant employers to report on the difference in both the mean and median bonus pay.

 

15. What if a cash bonus is earned but not paid until a later date?

It is likely that deferred cash bonuses will be treated in the same way as remuneration in the form of securities etc (see 11 above) and will be treated as paid to the employee at the time and in the amount in respect of which they give rise to a liability to income tax.  The Acas guidance (see 19 below) supports this.

 

16. What if the data does not present a full picture?

Employees can add a narrative to the report to explain the background to any discrepancies or gaps in information.

 

17. If a gender pay gap is identified will an employer be more at risk from equal pay claims?

A gender pay gap does not mean than an equal pay claim will be proven although a gap may encourage an employee to bring an equal pay claim.

 

18.  What are the penalties for non-compliance?

The explanatory notes state that failure to comply with the regulations would be an ‘unlawful act’ for the purposes of Part 1 Equality Act 2006 and would fall within the existing enforcement powers of the Equality and Human Rights Commission.  This provision is only in the explanatory notes, however and not in the regulations themselves. Commentators have pointed out that there is no effective provision in the 2006 Act and that this statement is meaningless. The government has not created any specific additional civil or criminal penalties. The government is in effect relying on ‘name or shame’ to ensure that employers comply.

19.  Will there be any guidance?

Acas has published detailed draft guidance on the regulations at http://www.acas.org.uk/media/pdf/l/6/Gender_Pay_Reporting_GUIDE.pdf

20.  Will overseas workers be included?

The previous draft regulations stated that a relevant employee was one who ‘ordinarily works in Great Britain’. This is missing from the final regulations. The explanatory memorandum (which does not form part of the regulations) sets out the territorial extent of the regulations as Great Britain but this does not really assist since this simply acknowledges the extent of the Equality Act.  The Acas guidance (see 19 above) states that an employee will be within the scope of the regulations if they can bring an ET claim under the Equality Act, ie normal jurisdiction principles under the Act apply.

21.  Are the GPG Regulations the same as the GPG Public Sector Regulations?

The GPG Public Sector Regulations are largely in the same form as the GPG Regulations. There are some differences: the Public Sector Regulations come into force on 31 March 2017 (whereas the GPG Regulations come into force on 6 April 2017); the snapshot date is 31 March each year; there is no requirement for the report to be accompanied by a signed statement.

 

Information to be included in GPG report

 

The difference between the mean hourly rate of pay for male and female employees expressed as a percentage

Only full pay employees are included in this calculation (see 9 g).

The percentage must be calculated:

___(A-B)_____   x100

       A

Where A is the mean hourly rate of pay of all male full-pay relevant employees; and

B is the mean hourly rate of pay of all female full-pay relevant employees

 

The difference between the median hourly rate of pay for male and female employees expressed as a percentage

The percentage must be calculated:

___(A-B)_____   x100

       A

Where A is the median hourly rate of pay of all male full-pay relevant employees; and

B is the median hourly rate of pay of all female full-pay relevant employees

 

The difference between the mean bonus pay paid to male and female employees over the 12 months ending 5 April expressed as a percentage

The percentage must be calculated:

___(A-B)_____   x100

       A

Where A is the mean bonus pay paid during the relevant period to all male relevant employees who were paid bonus pay during that period; and

B is the mean bonus pay paid during the relevant period to female relevant employees who were paid bonus pay during that period

Relevant period in this provision means 12 months ending with the snapshot date

The difference between the median bonus pay paid to male and female employees over the 12 months ending 5 April expressed as a percentage

The percentage must be calculated:

___(A-B)_____   x100

       A

Where A is the median bonus pay paid during the relevant period to all male relevant employees who were paid bonus pay during that period; and

B is the median bonus pay paid during the relevant period to female relevant employees who were paid bonus pay during that period

Relevant period in this provision means 12 months ending with the snapshot date

The proportions of male and female employees who were paid bonus pay over the 12 months ending 5 April

·         The proportion of male relevant employees who were paid bonus pay to be expressed as a percentage as follows:

___(A-B)_____   x100

       A

Where A is the number of male relevant employees who were paid bonus pay during the relevant period; and

B is the number of male relevant employees

·         The proportion of female relevant employees who were paid bonus pay to be expressed as a percentage as follows:

___(A-B)_____   x100

       A

Where A is the number of female relevant employees who were paid bonus pay during the relevant period; and

B is the number of female relevant employees

Relevant period in this provision means 12 months ending with the snapshot date

 

The proportions of male and female employees in quartile pay bands

·         Step 1: determine the hourly rate of pay for each male and female employee and rank from lowest to highest paid

·         Step 2: divide the employees into four, each section comprising an equal number of numbers to determine the lower, lower middle, upper middle and upper quartile pay bands

·         Step 3: the proportion of male employees within each quartile band must be expressed as a percentage of the employees within that band as follows:

 

___(A-B)_____   x100

       A

Where A is the number of male employees in a quartile pay band; and

B is the number of relevant employees in that quartile pay band

·         Step 4: the proportion of female employees within each quartile band must be expressed as a percentage of the employees within that band as follows:

___(A-B)_____   x100

       A

Where A is the number of female employees in a quartile pay band; and

B is the number of relevant employees in that quartile pay band