The Government has published the revised draft of the Gender Pay Gap Information Regulations which are due to come into force in April 2017. Whilst the revised regulations do clarify some of the issues raised in the previous draft in February there are still some points on which further guidance is needed.
Which employees are covered?
Whilst the term “employees” is not defined, the Explanatory Notes clarify that “employment” is as defined in the Equality Act 2010 which includes a person who works under a contract of service, a contract of apprenticeship or a contract to do work personally, therefore extending to “workers” who may not be paid via the employer’s payroll. Whilst these individuals will be taken into account for determining the 250 threshold, a new regulation (regulation 2(3)) provides for an exemption that in compiling the relevant information, the employer is not required to include data relating to a relevant employee if the employee is a worker (i.e. employed under a contract personally to do work) in respect of whom the employer does not have, and it is not reasonably practicable for the employer to obtain, the data.
In addition, partners, including partners in an LLP count towards the 250 employee threshold but do not have to be included in the calculation of the pay gap.
The new regulations have removed the definition of employees to those who work wholly or partly outside Great Britain. However, it is assumed that employers will be expected to include those employees who have a “strong connection” with the UK as determined by existing case law on territorial jurisdiction. It is hoped that further information on this will be included in the guidance.
What information needs to be provided?
Whilst the basic obligations on employers remains the same, the new regulations do set out further information on what is required.
Employers must publish:
- The difference between the mean hourly rate of pay of male and female “full-pay relevant employees”;
- The difference in the median hourly rate of those employees;
- The difference between the mean and median bonus pay paid to relevant employees and the proportion of male and female employees who were paid a bonus; and
- The proportion of male and female “full pay relevant employees” set out in quartile bands.
The information must be published on the snapshot date which has been changed from 30 April to 5 April.
The definition of “full pay relevant employees” for the hourly rate of pay and quartiles information excludes those employees who are not on full pay as a result of being on leave (including all types of family friendly leave, annual leave or sickness absence). Therefore, for example, any woman on maternity leave at the snapshot date will only be included if she is receiving full pay at that date. If she is receiving statutory maternity pay only, then she will not be included for those pay calculations, but should be included in the calculation of the mean and median bonus and the proportion of employees paid a bonus.
Calculating the employees’ hourly rate of pay.
Regulations 6 and 7 set out detailed steps of the method by which employers must calculate employees’ gross hourly pay, which includes using a 12 week reference period for employees whose working hours vary from week to week.
In addition, the previous draft of the regulations included the full amount of bonus payments in the gross hourly rate of pay figure if such a bonus was paid in the relevant pay period. Regulation 6 states that only a portion of the bonus payment proportional to the relevant pay period should be included in the calculation of an employee’s gross hourly pay.
The definition of bonus pay has been further clarified. The regulations make it clear that where the employee is paid a bonus in the form of securities, or securities options, this should be treated as paid at the time and in the amounts in respect of which it gives rise to liability to income tax. Whilst it is not expressly stated that this is the same for a deferred bonus, it would appear that this is the case.
The new regulations set out further details of how the quartile bands should be calculated. The hourly rates of pay should be ranked from lowest to highest and then divided into four quartiles each containing an equal number of employees. The Government has recognised that this method could be open to manipulation and therefore where employees receive the same hourly rate fall within more than one quartile, the employer must assign relative proportions to each quartile.
The new regulations do not contain any sanctions for failure to comply. However, the explanatory notes state that a failure to comply with an obligation imposed by the regulations will constitute an unlawful act within the meaning of section 34 Equality Act 2006. This allows the Equality and Human Rights commission to take enforcement action against defaulting employers.
Once Parliament has approved the Regulations, we are promised the publication of a non-statutory guidance. This will be welcomed by employers.