Mind the Gap! UK Gender Pay Gap Reporting
UK employers with 250 or more employees will be required to report on gender pay gaps in their organizations under a new UK regulation, due to come into effect on April 6, 2017.
Covered organizations will be required to publish a statement annually, setting out the following:
- the difference between the male and female (i) mean (average) and (ii) median (mid-point) rates of pay;
- the difference between the male and female (i) mean and (ii) median bonuses (or other incentives) received;
- the proportion of (i) male and (ii) female employees who received a bonus (or other incentives) during the preceding year; and
- the proportion of (i) male and (ii) female employees in each quartile of pay in the workforce (where all employees are ranked in order of pay and split into four equal groups).
Unlike the U.S. EEOC’s proposed salary reporting requirements, the reporting obligation under the UK regulations does not take into account the types of jobs held by employees. This means that even if a significant gender pay gap is shown, the results would not necessarily reveal whether there is a potential equal pay problem (i.e., women being paid less for similar jobs) or whether women hold a disproportionate number of lower paying jobs in an organization.
The data is to be taken as of a “snapshot” date, being April 5, 2017 and then April 5th of each subsequent year. The information must then be published on the organization’s website within 12 months of this snapshot date and be publicly accessible for the following 3 years. In calculating whether an employer has 250 or more employees, triggering application of the new regulation, each entity within a corporate group is assessed separately rather than aggregated across the group.
The regulations cover all individuals working under contracts of employment or apprenticeship as well as those contracted “personally to do work”. This will cover workers within organizations who might not typically be classified as employees. However, partners (including members of a limited liability partnership) are expressly excluded from the pay gap calculations.
There remains uncertainty over how the regulations will apply to multinational companies. The final version of the regulations indicates that certain employees working outside the UK may need to be included in the calculations in certain circumstances. However, official guidance from the UK government will likely be published to clarify these issues.
Looking ahead, UK employers who are covered by these regulations should review their likely figures for the upcoming snapshot date of April 5, 2017. While there are currently no direct penalties for non-compliance, given the public nature of the statement, any organization that fails to publish such information is likely to suffer adverse publicity and reputational damage. Taking steps to analyse what these figures will look like ahead of the snapshot date might also allow organizations to adjust any disparities that could themselves have reputational impact or increase the risk of equal pay claims.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.