By April 2018, all businesses with 250 employees or more will be required to publish statutory calculations every year showing how large the pay gap is between their male and female employees, giving them a year to get their house in order.
Whilst 12 months may seem like ample time, getting gender pay reporting right can require a significant amount of effort and consideration, particularly for firms with complex corporate structures. Added to this, research suggests many companies aren’t ready to handle the incoming requirements, with one in four intending to delay taking action until the very last minute.
Businesses simply can’t afford to take a ‘wait and see’ approach. In an ideal world, those affected would have already started putting the necessary measures in place to prepare for the new legislation, however there is still time for those that have failed to do so, provided they act now.
Know the requirements
One of the biggest sticking points preventing many firms from putting the wheels in motion is that they don’t know where to start, whilst others are even unsure if they will be required to report altogether.
In order to prepare, companies must assess whether they currently have more than 250 employees as of April 5th each year, as this will determine whether or not they need to document their pay gap. However, even those that come close to but don’t quite meet the 250 employee threshold should consider monitoring for gender pay imbalances. Gender pay is not an issue that is likely to go away, so even if a company is not in the scope on this occasion, any plans for expansion could mean they will be by the time the next snapshot takes place the following year. Being proactive and taking action now will put companies on the front foot and make processes much easier to manage in the long run.
Employers must then familiarise themselves with the six metrics they will need to publish, which are:
- ‘The mean gender pay gap’ – The difference between the mean hourly rate of full-pay male employees and that of full-pay female employees
- ‘The median gender pay gap’ – The difference between the median hourly rate of pay of full-pay male employees and that of full-pay female employees
- ‘The mean gender bonus gap’ – The difference between the mean bonus pay paid to relevant male employees and that of relevant female employees
- ‘The median gender bonus gap’ – The difference between the median bonus pay paid to relevant male employees and that of relevant female employees
- ‘The proportions of men and women getting a bonus’ – The proportions of male and female employees paid bonus pay
- ‘The proportion of men and women in each of four pay quartiles’ – The proportions of male and female relevant employees in the lower, lower middle, upper middle and upper quartile pay bands.
Based on these requirements, businesses should consider if they have the in-house capabilities to conduct the necessary analysis across their organisations and whether they have systems that can extract the information needed to show evidence of any pay gaps.
For companies lacking this internal support, seeking professional guidance externally can help ensure decision makers are objectively assisted to analyse their data and consider their options.
Construct a strong narrative
Companies will be required to publish their data both on their own website and a government website (currently under construction) by April 2018 along with a written statement to confirm that the calculations are accurate. This must be signed by somebody with authority within the organisation, such as a director or CEO.
Under the terms of the legislation, those that breach the regulations by failing to report the information accurately could face enforcement action and, at the very least, significant reputational damage could be caused.
Companies will be invited to upload a narrative alongside their data, providing context and explaining the reasoning for large gaps, if they have any. This is an opportunity for them to demonstrate the remedial action they are taking to address any issues and is key in preserving reputation both internally and externally. The earlier companies prepare their narrative, the better. It should be very carefully considered to ensure the messaging is strong and reinforces the firm’s positioning to reassure staff.
While some might conclude that greater transparency about existing pay levels is all that is needed to negate any risk others, particularly those with gaps above the national average, will need to take action to reduce reputational damage.
There are several ways businesses can show evidence of trying to address gender pay gaps. Demonstrating that they are reviewing pay structures, starting salaries, reward packages, internal promotion and are investing in recruitment training is a good place to start.
If companies publish their data without any contextualisation they risk sending a negative message to prospective employees and competitors and, worse still, current staff members are likely to ask difficult questions, such as how their pay measures against specific individuals in the same role.
Businesses also open themselves up to the risk of litigation, as employees may decide to bring equal pay claims if they do not feel reassured that their employer is taking the issue seriously.
Don’t bury your head in the sand
With just over 12 months to go, employers have a window in which to prepare and get one step ahead – if they act now. Companies that heed the warnings and adopt a positive approach to addressing the gender pay gap will have an opportunity to strengthen their brand and encourage loyalty from existing staff, as well as attract new talent. Waiting until the very last minute to put plans into place is simply not worth the risk.
Helen Hughes is a legal director at Shakespeare Martineau.