Revised draft gender pay gap reporting regulations published

David Potter, Freeths, Nottingham

On 6th December 2016, the Government published the revised version of the draft Equality Act 2010 (Gender Pay Gap Information) Regulations. These Regulations are expected to come into force on 6 April 2017 pending parliamentary approval, from which point, employers will have 12 months to publish the data. The following points outline and clarify the changes introduced in the revised draft:

• The amendments include: the clarification of the calculation of quartile pay bands, a new definition of ‘relevant employee’, clearer guidelines on how to calculate gross hourly pay, new principles governing bonus pay and a new ‘snapshot date’.
• In calculating their mean and median gender pay gaps and their pay quartiles, employers are now required to base their calculations only on ‘full-pay relevant employees’ (i.e. employees who are not, being paid at a reduced rate or nil as a result of being on leave). This addresses the concern that, an employer’s gender pay gap could appear to be greater if, for example, it had a significant number of female employees absent on maternity leave and receiving statutory maternity pay at the snapshot date than if the calculation were based on the employees’ normal rate of pay.
• Clarification has also been provided on how to calculate quartile pay bands. The proportion of male or female employees in each quartile will accordingly be calculated by dividing the number of male or female employees in the quartile by the total number of employees in the quartile, and multiplying by 100.
• The definition of ‘relevant employee’ has been amended, to mean ‘a person who is employed by the employer on the relevant snapshot date’. The Regulations also provide for an exception from the reporting duty in relation to workers (i.e. those employed under a contract personally to do work) whom the employer does not have, and it is not reasonably practicable for the employer to obtain the relevant data; addressing the difficulties employers could have faced in gathering relevant data for workers who are not in their normal payroll systems.
• The Regulations now set out in detail the method by which employers must calculate employees’ gross hourly pay, using an employee’s normal working hours where applicable, and adopting a 12-week reference period for employees whose working hours vary from week to week. This improves upon the previous definition: ‘the weekly pay divided by weekly basic paid hours for each relevant employee’, which would have been problematic in respect of casual workers who did not have weekly basic paid hours.
• The Government has addressed the concern of the inclusion of bonus pay which could distort figures, by providing that only a portion of the bonus payment that is proportionate to the relevant pay period, should be included in the calculation of an employee’s gross hourly pay for the purposes of determining the employer’s mean and median gender pay gap.
• The definition of ‘bonus pay’ has also been amended, to make clear that elements of bonus that are awarded as securities, securities options and interests in securities are to be treated as paid at the point in time when they would give rise to taxable earnings or taxable specific income.
• It is also important to note that the ‘snapshot date’ for determining whether employers meet the 250 employee threshold and by which gender pay data must be gathered has moved from 30 April to 5 April each year. Employers are required to publish the gender pay gap information within 12 months of the ‘snapshot’ date therefore; employers will be required to publish their first gender pay gap reports in respect of the 2017 statistics by 4 April 2018.
• The Explanatory Notes to the amended draft Regulations indicate that failure to comply with the Regulations will constitute an ‘unlawful act’ which empowers the Equality and Human Rights Commission to take enforcement action.

For further information please contact:
David Potter
Partner
0845 2746819

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