If the proposed mandatory gender pay reporting is approved, businesses must be ready to face some very public scrutiny, says Jawaid Rehman
I run a business with more than 250 employees. I am worried about the introduction of mandatory gender pay reporting this year and the discrepancies this might highlight across my business. I am also concerned about the risk of equal pay claims and the employee relations issues that might arise.
In an effort to address the issue, regulations came into force in October 2014 which required employment tribunals to order employers who lose equal pay claims to undertake an equal pay audit. Those regulations have now been followed up with a bold move whereby the Government has backed reforms to introduce mandatory gender pay reporting in 2016. This will require companies with 250 or more employees to carry out an equal pay review and publish their gender pay gap.
A consultation on the proposals has been launched to discuss the precise measures and details of what will be required. It appears that employers could well be required to go beyond simply reporting the overall pay gap to also publish the difference between male and female starting salaries, the difference between average basic pay and total average earnings of men and women broken down by grade and job type, as well as other components such as bonuses.
Other details to be discussed include:
- where and how frequently the data will be published;
- to what extent employers can contextualise the results with supplementary narrative
and remedial plans;
- what systems will be required to collect the data and what that will cost; and
- what support needs to be put in place to help employers with implementation.
Employers may well be unaware that a gender pay gap exists until it analyses its pay information. The potential discrepancies that gender pay reporting might highlight is likely to be the source of some concern and apprehension for employers, coupled with the burden and cost of collecting and reporting the data in the first place.
If the results are positive, publication of a gender pay gap could increase employee confidence in the remuneration process and enhance an employer's corporate reputation. However, if inequalities are highlighted, this could have a number of significant and harmful implications for companies, including negative publicity, reputational damage and the significant costs associated with employee claims for equal pay going back up to six years.
The worry for employers is that they may be forced to open a can of worms they would rather keep closed, especially in light of the media attention that equal pay issues attract, and no-win no-fee solicitors now looking to target private sector organisations.
The best advice is to be proactive and carry out an equal pay audit. This will allow you to:
- identify any gender pay gaps at an early stage;
- consider whether any material defences might apply (ie explanations for the differences in pay which are unrelated to gender);
- identify any high-risk areas; and
- consider how to remedy any issues before the reporting obligations come into effect.
There is a proposed fine of ï¿¡5,000 for non-compliance. To some businesses this is not a significant amount of money, but the negative publicity and reputational damage could be far more costly. Where equal pay claims arise, a tribunal may be influenced by the fact that a pay audit has not been carried out or reporting obligations have not been complied with.
Those employers that are prepared to be proactive have an opportunity to mitigate any legal and commercial risks. In doing so, expert legal advice in this specialist area is important.
Jawaid Rehman is an employment partner at national law firm Weightmans LLP
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