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London’s gender pay gap worst in the UK

The Office for National Statistics published data this week that shows London as a region has the widest gender pay gap in the UK. Currently, women working full-time in London earn 14.6 per cent less than their male colleagues. In the past twenty years the gap has narrowed only slightly from 15.1 per cent. In contrast, during this same period the pay gap in Wales and Scotland has gone from 17.5 per cent and 18.4 per cent to 6.3 per cent and 6.6. per cent respectively.

Among part-time workers however, women on average earn more than their male counterparts. The gap is narrowest in the South-East where women earn 3.1 per cent per hour more than men. This is down from 1997 when women typically earned 9 per cent more, indicating that men’s wages have grown quicker in this area.

The variation for part time workers in both the public and private sector is stark. In 1997 women working part-time in the public sector earned 6.1 per cent less. This gap has now widened to 22.3 per cent. The position has in fact reversed in the private sector where women earned 2.2. per cent less than men two decades ago and now earn 2.6 per cent more.

Although the gender pay gap reporting obligations introduced this year are certainly a step in the right direction, these latest statistics show that much work is still needed if the gender pay imbalance is to be improved in London and throughout the UK.

London’s gender pay gap worst in the UK

Publication of gender pay details

To date most companies have been slow to release details of their gender pay gap with only 176 companies publishing their data.

With some 8,800 yet to reveal their figures, Theresa May has called for more companies to report on their gender pay gap to address the inequality in the workplace. She said that, “the gender pay gap isn’t going to close on its own” and that “we all need to be taking sustained action to make sure we address this.” Nevertheless, the only Government Department to have so far published their figures is the Department for Education which has a gap of 5.9%.

So far a handful of City businesses have published details of their gender pay gap and the results are as anticipated with reported median gaps of between 24% and 35.7%.

The Prime Minister’s announcement comes in the wake of a report, published by the World Economic Forum, which showed that the UK has dropped from a ranking of 9th in the world to 15th in respect of its gender gap. This ranking comes after a study from the Chartered Management Institute which showed a 27% pay gap among the UK’s 3.3 million managers, where men outnumber women three to one.

While the gender pay gap reporting obligations are an important step in the right direction, it seems that much work is still needed to reduce the gender pay imbalance in the UK.

Publication of gender pay details

Landmark legal battle that could prevent women earning less than men in the UK

The latest hearing in the UK's largest ever private sector equal pay claim is due to kick off today, in a case that could eventually see around 15,000 predominantly female Asda workers recovering well over £100m in pay.
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Landmark legal battle that could prevent women earning less than men in the UK

Ethnicity Facts and Figures

On Tuesday 10 October 2017, the Government launched a new website – Ethnicity Facts and Figures – the aim of which is to challenge society to “explain or change” disparities in how people from different ethnic backgrounds are treated.
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Ethnicity Facts and Figures

BBC pay: Gender pay gap back in the spotlight

On Wednesday, the BBC published its annual report on pay for stars earning more than £150,000, and the statistics have been revealing to say the least. As an illustration, the top five highest earning men earn three times more than the top five highest earning women. Whilst the fact of a pay gap may be unsurprising, the scale is still shocking.
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BBC pay: Gender pay gap back in the spotlight

The irregular thing about the Gender Pay Regulations…

As reported in our article “It’s all change in employment law in April…”, private employers with 250 employees or more should have collated their relevant data on the first annual “snapshot date”, on 5 April 2017. These employers must publish their calculations by 4 April 2018. Public employers’ “snapshot date” was 31 March 2017 and they must publish their calculations by 23 March 2018.

However, now that the process of calculating the key pieces of information has begun, many employers are realising that their figures reveal a significant (and often unexpected) pay gap. While the aim of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations) is to address the UK’s gender pay gap, the reality behind the figures published will not always paint an accurate picture. The figures may demonstrate a demographic gap, rather than an equal pay gap. For example, the cause of a gender pay gap may be the result of a greater distribution of men in higher paid roles, rather than a disparity in equal pay. However, just because data reveals a demographic gap, it does not mean that this is not something which the government is trying to address. The Regulations attempt to deal with this issue through the inclusion of quartile calculations.

Where employers’ data reveals that there is a gender pay gap, many employers will assert that they pay their employees in a non-discriminatory manner and try to justify the disparity as being a result of the workforce demographic. However, even where employees receive equal pay, the results do not remove the risk that there are other discriminatory factors causing the disparity. For example, while an employer’s pay gap may be a product of how its workforce is spread across the business, this might be a result of discrimination on a different level, such as against females applying for senior positions. Alternatively, there may be other sufficient reasons for a gender pay gap, such as a shortage of qualified men or women in a certain industry. Therefore, the calculations may go a long way to emphasise the issues that companies continue to face and could provide an impetus on employers to deliver a solution.

This is where the optional narrative can be an important element of employers’ publishing obligations. This is an opportunity for employers to provide a commentary on the figures published and pacify any reputational risk that might arise from publishing the headline figures alone. It is quickly becoming more widely understood that the Regulations do not in fact deal with equal pay but this does not mean that the government is not taking steps to tackle other factors that are causing a gender pay gap. Therefore, employers have the opportunity to use their narratives to acknowledge the issues they continue to face and offer a way forward to improve these problems in conjunction with the government’s efforts. By doing so, any pay gap may be explicable and employers can be seen to be responding to the results proactively. This in turn might potentially minimise the risk of adverse publicity or internal grievances raised by employees.

The irregular thing about the Gender Pay Regulations…

The Great Divide

With reporting obligations due to come into effect from 6 April 2017, the gender pay gap debate has taken centre stage over the past year. With the UK gender pay gap still sitting at over 18 per cent, it is unsurprising that this has been the focus of political and media attention. The purpose of the regulations is not just to force employers to mechanically calculate their pay and bonus gaps, but also to encourage employers to look inwards to identify why any gaps are arising and what steps can be taken to achieve parity. Considering the business case for closing the gender pay gap is tantamount to the success of this latest government initiative.

But the gender gap is not the only gap which affects our productivity in the UK. A government backed review has found that helping black and minority ethnic (BME) people to progress in their careers at the same rate as their white counterparts could add £24bn to the UK economy each year (a boost to GDP of 1.3 per cent).

The report by Baroness McGregor-Smith, who became the first Asian woman to run a FTSE 250 company when she took over at Mitie in 2007, found that people from BME backgrounds were still often disadvantaged at work. Whilst the Baroness acknowledged that this is still in part down to overt race discrimination, she said, for the most part, the differential treatment is actually down to unconscious bias. She also noted that the UK has a structural, historical bias that favours certain individuals.

The review found that employment rates amongst people from BME backgrounds were 12 per cent lower than for white counterparts. It also found that just six per cent reached top-level management positions. But this isn’t new. A report by the TUC in February last year identified that staff from all ethnic minority backgrounds, qualified to degree level, faced a 10 per cent pay deficit in comparison to their white counterparts, with the figure rising to 17 per cent for those with A-levels only.

Of course the reasons for the gap are not straightforward. However, Frances O’Grady, TUC General Secretary, stated that “this is not just about education, but about the systemic disadvantages ethnic minority workers face in the UK”. A study by the Institute for Social and Economic Research at the University of Essex found British ethnic minority graduates were between five and 15 per cent less likely to be employed six months after graduation than their white peers at the same institutions.

One of the main recommendations of the Baroness’ report is legislation to make firms with more than 50 workers publish a breakdown of their workforce by race and by how much they are paid. She suggested that firms should draw up five-year diversity targets and nominate a board member to deliver them. She also noted that she wants to see diversity as part of public procurement guidelines.

Government ministers have been quick to respond in support of the general recommendations of the report but they have ruled out introducing new legislation. Instead, Business Minister, Margot James, has asserted that “the best method is a business-led, voluntary approach and not legislation as a way of bringing about lasting change.” This recommendation is not however supported by the history of gender pay gap reporting.

The 2010-2015 coalition government initially decided to introduce gender pay reporting on a voluntary basis, in the “Think, Act, Report” scheme. Whilst 200 firms signed up to the initiative’s principles, only a handful actually published their gender pay gap statistics. With pressure mounting on the government, the then Prime Minister, David Cameron, announced that the government would “end the gender pay gap in a generation”; a bold statement and one that he could only dream of achieving if it was specifically legislated for. Here’s hoping the new regulations achieve that honourable goal.

But the question is, in light of the gender pay gap experience, can we expect new legislation providing for race/ethnicity pay gap reporting? In the medium term at least it seems likely. By that point, employers will hopefully have developed the infrastructure that will mean that calculating these gaps and reporting on them should not be too much of an onerous task. However, employers should ideally be taking informal steps to assess their race/ethnicity pay gap now and should start to consider initiatives that they might take to close the gap within their workforce. That way, they can be ahead of the curve if and when race/ethnicity pay gap reporting obligations do come into force.

The Great Divide

New ACAS Guidance on gender pay reporting

With the commencement of the gender pay reporting obligations in April, ACAS have provided a helpful summary (as well as more detailed guidance) on the regulations.

By way of brief reminder, the regulations require that employers with 250 or more employees annually publish calculations that show the gender pay gap between their male and female employees. The calculations that need to be published are:

1. Average gender pay gap as a mean average;
2. Average gender pay gap as a median average;
3. Average bonus gender pay gap as a mean average;
4. Average bonus gender pay gap as a median average;
5. Proportion of males receiving a bonus payment and proportion of females receiving a bonus payment; and
6. Proportion of males and females when divided into four groups ordered from lowest to highest.

These calculations must be published (both on the company website and on a government website) within 12 months of the snapshot date (5 April each year). Companies may include a narrative explaining the calculations. This is an opportunity for companies to set out the challenges that they face, the success they’ve had, and/or set out their long terms plans to close the gender pay gap.

For further detail please click here to see our previous article on the revised regulations and click here to see the ACAS Guidance.

New ACAS Guidance on gender pay reporting

Extending gender pay gap reporting to public sector employers

Following the women’s march over the weekend, in which hundreds of thousands of women globally took to the streets to march for women’s rights, it seems apt that only last week the Government published the draft Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017.

The draft regulations extend the duty to publish annual gender pay gap reports to public sector employers with over 250 employees. The draft regulations broadly reflect the draft gender pay gap regulations published in December last year, which apply to private sector employers with over 250 employees.

However, there are a couple of key differences. Specifically, the public sector duty will take effect as part of the existing public-sector equality duty, rather than as a standalone requirement. Whilst the stipulated ‘snapshot’ date for relevant private sector employers is 5 April, the ‘snapshot’ date for public sector employers will be 31 March.

As we’ve previously noted, the Government’s response paper issued in December did deal with a number of the outstanding issues relating to gender pay gap reporting. However, there are still unanswered questions and it is hoped that the Government will issue further guidance before the gender pay gap regulations come into force. It is currently anticipated that they will come into force by April 2017.

Employers should be carefully considering whether or not they are likely to be caught by the new regulations and be carrying out some initial analysis to determine what their gender pay gap is likely to look like. Employers may wish to consider whether there could be a benefit to changing bonus structures or bonus payment dates under any plans they operate, if their current arrangements are likely to inflate their pay gap.

Ultimately the aim of gender pay gap reporting is for employers to show that they are making progress in closing their gender pay gap, year on year. Employers will be assessed against their industry peers, and websites have already been set up to enable stakeholders to undertake a comparison exercise. Whilst voluntary under the current draft regulations, narratives could be a useful tool for employers to explain any pay gaps and to set out what steps they are taking to improve their statistics.

Extending gender pay gap reporting to public sector employers

Revised draft Equality Act 2010 (Gender Pay Gap Information) Regulations: Key points

The government has published the much anticipated revised version of the draft Equality Act (Gender Pay Gap Information) Regulations. The key points to note are:

  1. The draft Regulations are due to come into force on 6th April 2017.
  2. The snapshot date will now be 5 April each year (rather than 30 April). Gender pay gap information will need to be published within 12 months, meaning that the first reports are due by 4 April 2018.
  3. The definition of “relevant employees” has been clarified and means “a person who is employed by the employer on the relevant snapshot date“. This is to include both workers and employees. There is, however, an exception to the duty to report for employees who are employed under a contract personally to do work where “the employer does not have, and it is not reasonably practicable for the employer to obtain, the data“.
  4. Only “full-pay relevant employees” need to be included when calculating the relevant gender pay gaps. This is to combat the distortion in figures that relevant employees who are being paid at a reduced rate or nil, as a result of being on leave, would cause. Leave includes annual leave, maternity leave, paternity leave, shared parental leave, sick leave and special leave.
  5. The updated Regulations have clarified how “gross hourly pay” should be calculated. This should be calculated by reference to an employee’s normal hours, however where no such normal hours are kept, a 12-week reference period should be used.
  6. There are two points to note in relation to bonus pay:
    1. bonus pay is still to be included in the calculations, however under the revised regulations only the portion of the bonus payment that is proportionate to the relevant pay period should be included when calculating gross hourly pay; and
    2. bonuses paid in the form of securities, securities options and interests in securities are to be treated as paid at the point that they would give rise to taxable earnings.
  7. Quartiles are to contain equal numbers of employees. To create quartiles, employers should rank all relevant employees in order of their hourly pay (low to high) and then divide the employees into four equal groups.
  8. Previously, the Regulations and guidance were silent as to what penalty might be applied in the event of non-compliance. However, the Explanatory Notes now state that a failure to comply with the reporting obligations could constitute an “unlawful act” under the Equality Act 2010. This means that the Equality and Human Rights Commission could take enforcement action.
Revised draft Equality Act 2010 (Gender Pay Gap Information) Regulations: Key points