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From 6 April 2017, large employers are required to produce an annual report with data about their gender pay gap. The gender pay gap shows the difference between average earnings for men and women. The aim of requiring organisations to publish this data is to encourage them to identify gaps and set action plans to reduce gaps for the future.
This fact sheet is designed as an overview of the requirements. For more detail, see Gender Pay Gap Reporting Factsheet FS20.02. The calculations can be complex and for specific advice needs or for more detailed guidance we recommend that you speak to your legal advisor.
The obligation to report on an organisation’s gender pay gap derives from section 78 Equality Act 2010 and accompanying regulations. ACAS has produced a non-statutory guide to help employers comply with their obligations – Managing gender pay reporting.
The guidance covers both public authorities and private- and voluntary-sector employers, although slightly different obligations apply to public authorities. This factsheet deals with private- and voluntary-sector employers only. For information about the duties applicable to public authorities, see Gender Pay Gap Reporting – Public Authorities [FS20.03].
Employers are required under the legislation to produce an annual report setting out various pay figures for their workforce. These include:
The data is to be taken at a “snapshot” date, which is 5 April in each year, and the obligation is to report on this data within the following 12 months. Employers are encouraged to provide any explanations or comments they wish to explain any pay gaps, and what action they intend to take.
The obligation applies to private or voluntary sector employers with 250 or more employees at the snapshot date. The snapshot date is 5 April in the relevant year.
The obligation is to report on pay for “relevant employees”. This is defined as an employee employed on the snapshot date, with the exception of partners.
Only “full-pay” employees are included in the calculations based on ordinary pay (those for mean and median hourly pay, and the numbers of male and female employees in each quartile). “Full-pay” employees are those who are not being paid at a reduced rate or nil rate as a result of the employee being on leave during the relevant pay period (see below) or at a nil rate for any other reason.
For more information on the calculations to be performed, see Calculations below and A practical guide to the gender pay gap reporting calculations FS20.03.
The regulations refer to “ordinary pay”, “bonus pay” and “hourly rate of pay”.
Ordinary pay is defined in the regulations. It includes basic pay, allowances (including those for ancillary duties such as fire warden, location allowances such as London weighting, recruitment and retention allowances, allowances for the purchase, lease or maintenance of any item such as a car or clothing or payments for being on-call), pay for piecework, pay for leave and shift premium pay. It only includes money payments, so anything that is not money (such as benefits in kind or securities) is excluded. Gross amounts should be used after salary sacrifice.
Ordinary pay does not include pay related to overtime, redundancy or termination of employment, pay in lieu of annual leave, pay which is not money (benefits in kind) or expenses.
The calculations should be based on gross pay, therefore before any deductions are made for tax or employee’s pension contributions (unless the contribution is made via salary sacrifice, see above).
“Bonus pay” includes cash, securities, options, vouchers or other interests which relate to profit sharing, productivity, performance, incentive or commission which is paid to the employee in the relevant pay period. It is irrelevant whether the bonus relates to a different period, it is the timing of the payment that determines if the bonus needs to be included in the calculations.
The employer will need to calculate the ordinary pay, bonus pay and hourly rate of pay for each relevant full-pay employee in the relevant pay period.
The relevant pay period is the month (for monthly paid staff) or week (for weekly paid staff) in which the snapshot date (5 April) falls. This means that annual or quarterly bonuses may fall within the relevant pay period if they are paid in April. To avoid such bonuses distorting the figures, such bonuses should be pro-rated so that only 1/12th of the annual bonus (or 1/3rd of a quarterly bonus) is used for the calculation of hourly rate of pay for the relevant pay period.
The relevant period for gender bonus pay reporting is the 12 months prior to the snapshot date.
Employers will need to calculate an hourly rate of pay for each relevant full-pay employee. To do this, the employer must divide the employee’s ordinary pay and bonus pay for the relevant pay period (see above) by the employee’s working hours. These are calculated depending on whether the employee has normal working hours, no normal working hours or is paid on a piecework basis. See A practical guide to the gender pay gap reporting calculations FS20.03.
For employees with normal working hours, the weekly working hours will be the contractual working hours set out in the contract applicable to the employee at the snapshot date.
For employees with no normal working hours, the weekly working hours will be the average hours worked across the 12 weeks ending with the last complete week of the relevant pay period. Weeks where no work has been done (such as a week of sickness absence) should be substituted with an earlier week.
To calculate working hours for piecework employees, see National Minimum Wage.
To understand what qualifies as working time, see Working Time Regulations.
The following must be calculated using each relevant full-pay employee’s hourly rate of pay.
The mean average hourly rate of pay is found by adding up all of the hourly rates of pay for each gender and dividing this figure by the number of employees of that gender. Employers will therefore produce a male mean average and a female mean average. The mean gender pay gap is then calculated by subtracting the mean hourly rate of pay of all female full-pay employees (B) from the mean hourly rate of pay of all male full-pay employees (A), dividing this by the mean hourly rate of pay of all male full-pay employees (A) and multiplying by 100, i.e.
(A – B) x 100 = % mean gender pay gap
The median average hourly rate of pay is found by listing the hourly rates of pay for each employee in each gender in numerical order and taking the middle number. The median gender pay gap is then calculated by subtracting the median hourly rate of pay of all female full-pay employees (D) from the median hourly rate of pay of all male full-pay employees (C), dividing this by the median hourly rate of pay of all male full-pay employees (C) and multiplying by 100, i.e.
(C – D) x 100 = % median gender pay gap
To calculate the proportion of male and female employees in each quartile, the employer must list all male and female full-pay employees together in order of hourly pay rate. This list should then be divided into four quartiles, with an equal number of employees in each quartile.
The employer should then calculate the proportion of male employees and of female employees in each quartile. This is expressed as a percentage.
To demonstrate the gender bonus gap, the employer will need to calculate the mean gender bonus gap, the median gender bonus gap and the proportion of male and female employees receiving a bonus.
The mean bonus is found by adding up all of the bonuses for each gender and dividing this figure by the number of employees of that gender. Employers will therefore produce a male average bonus and a female average bonus. The mean bonus gender pay gap is then calculated by subtracting the mean bonus of all female employees (F) from the mean bonus of all male employees (E), dividing this by the mean bonus of male employees (E) and multiplying by 100, i.e.
(E – F) x 100 = % mean gender pay gap
The median bonus is found by listing the bonuses for each employee in each gender in numerical order and taking the middle number. The median bonus gender pay gap is then calculated by subtracting the median bonus of all female employees (H) from the median bonus of all male employees (G), dividing this by the median bonus of all male employees (G) and multiplying by 100, i.e.
(G – H) x 100 = % median gender pay gap
The proportion of males receiving a bonus is calculated by taking the number of male employees receiving a bonus during the relevant bonus period (I), dividing this by the total number of male relevant employees (J), and multiplying by 100, i.e.
I x 100 = % of males receiving a bonus
The proportion of females receiving a bonus is calculated by taking the number of female employees receiving a bonus during the relevant bonus period (K), dividing this by the total number of female relevant employees (L), and multiplying by 100, i.e.
K x 100 = % of females receiving a bonus
Comparing the results for males and females will show how much more likely it is for a male employee to receive a bonus compared to a female employee.
The annual report must be published within 12 months of the snapshot date. This means that all large employers must have published their first report no later than 4 April 2018. The report should be uploaded to a government website (www.gov.uk/report-gender-pay-gap-data) and published on the employer’s own website and kept online and available to the public for three years.
The report must be accompanied by a signed written statement of accuracy and specify the name and job title of the person who certifies it as such. For companies, this should be a statutory director.
There is no obligation on any employer to provide any explanation for the figures or any gaps, but employers may wish to do so.
For a sample template report, see Template Gender Pay Gap Report TP20.01.
The regulations do not contain any express sanctions for employers who fail to comply with the gender pay gap reporting obligations or who publish false or misleading reports. However, the Government considers that the failure to comply will be an “unlawful act”, entitling the Equality and Human Rights Commission to investigate and/or issue an unlawful act notice.
The Government also intends to check for non-compliance and may publish tables of reported gender pay gaps. Employers should also consider the effect of adverse publicity should they fail to comply with the obligations, and the extent to which it may deter applicants from applying for roles.
The purpose of the gender pay gap reporting obligations is to look at the gap between the pay of men and women in the workplace, with the overall aim of narrowing that gap. However, published reports do not indicate that the gap is narrowing, rather that this continues to increase and therefore, we are likely to see some changes in this area in future.
This document has been created by, or on behalf of ESP Ltd, as a general document and as a guide in relation to its subject matter and has not been bespoke drafted for you or the specific circumstances in which you are looking to use it. Prior to using this document and undertaking any HR process you must consult your organisation’s own policies and procedures to ensure that you do not do anything in conflict with your own policies and procedures. If in any doubt as to how to use this document or, if you require any legal advice, please feel free to contact ESP Ltd on 0333 006 2929 and our legal team will be more than happy to assist. ESP Ltd will not be liable in any way for any actions undertaken by you or your use of this document unless we have been consulted regarding your use of this document as legal advisor to your business or have bespoke drafted any documentation in response to a specific support request.