UK: Final form regulations on gender pay gap reporting

The Government has published its long-awaited final form draft regulations on gender pay gap reporting. Subject to Parliamentary approval, the new requirements are due to apply to private sector employers with 250 or more employees from 6 April 2017.   A draft Explanatory Memorandum states that supporting non-statutory guidance will be published after Parliament has approved the regulations.

Key changes include:

• As expected (to mirror the consultation on the public sector duty), the date for the snapshot to be taken has shifted from 30 April to 5 April;  the first set of data will need to cover 6 April 2016 to 5 April 2017 and be published by 4 April 2018. 
• Employers must report the median gender bonus pay gap as well as the mean.
• The pay quartile wording has been clarified to specify that the workforce is to be divided into four equal sized groups.
• The previous definition of employee (by reference to individuals ordinarily working in GB and under a contract of employment governed by UK law) has been removed altogether, with the explanatory notes stating that the s83 Equality Act 2010 wider definition (including those with a contract personally to do work) will apply.  Partners, including members of LLPs, are expressly excluded.  There is also an exception from the reporting duty for workers with a contract personally to do work in respect of whom the employer does not have, and it is not reasonably practicable to obtain, the relevant data.
• To avoid the distortion caused by employees receiving lower than usual pay while on various types of leave, only 'full-pay relevant employees' are to be included in the data on hourly rates of pay.   
• There are new provisions specifying how to calculate the gross hourly rate of pay, covering employees with no normal working hours and the pro-rating of bonus.  There is also helpful clarification as to when remuneration in the form of securities, securities options and interests is to be treated as paid.

Employers will need to take action now, in particular to ascertain whose data must be included (given the broader definition of employees, which could extend to some self-employed contractors or 'consultants'), to ensure they have the necessary tools in place to collect the necessary data (particularly for casual workers), and to begin to consider how that data may be presented in terms of an accompanying narrative.

For further details, see our briefing here.  (Note this link is to the updated version of our briefing, to reflect the Government's response to the consultation on the draft regulations published a couple of days after the final form regulations).

The Minister for Women and Equalities has also launched an online tool to show the gender pay gap by occupation, available here.

Greater disclosure of pay information by private sector employers will increase the potential exposure to equal pay claims. Until now, these claims have been restricted largely to the public sector where pay information has often been more readily available. The retail sector has already seen an increase in claims, including the much-publicised claim by around 7000 (mainly female) Asda store workers to equal pay with (mainly male) depot workers. In a preliminary decision, the employment tribunal recently held that the depot workers satisfied the Equality Act threshold for comparators, namely that they were employed by the same employer on 'common terms' (as there was a significant correlation in a broad way between the terms in retail and distribution, including strong similarities in the respective handbooks), and that there was a 'single source' of those terms which could remedy any unequal treatment. The employer's argument that retail and distribution were two separate business divisions managed separately did not prevent there being a 'single source', as the executive board and its subcommittees exercised budgetary control and oversight over both divisions and could, or could subject to the overarching control of the US parent company, have introduced equality. Many employers will have a similar structure with board oversight over separate divisions; subject to a successful appeal, this ruling removes one potential defence to claims against such employers. (Asda Stores Ltd v Brierley)

Employers should also bear in mind that it may not be possible for them to defend equal pay (or other) claims in a vacuum, and that tribunal decisions on previous similar claims against them could be taken into account where they contain relevant findings of fact (eg, as to whether certain jobs are equivalent). In the context of equal pay litigation between employees who had TUPE transferred from a council to a new employer, the EAT in Birmingham City Council v Bagshaw decided that an employment tribunal was entitled to order third party disclosure from the council of the judgments and orders made by other tribunals in equal pay cases against the council, where the judge was aware they contained relevant findings of fact and the claimants had been unable to access the judgments from the Employment Tribunal Register of Judgments at Bury St Edmunds. From early 2017 there will be an online database of all new employment judgments.