As an employer, you might be paying a different average hourly rate to men and women within your organisation.
Some employers are required by law to report their gender pay gap every year.
Failure to comply with the regulations may result in government enforcement action and reputational damage.
In this guide, we'll explain what a gender pay gap is, the regulations around it, and how managers should manage gender pay gap reporting in organisations.
What is the gender pay gap?
The gender pay gap is the difference in the average earnings of men and women in organisations.
The gap is calculated using employer payroll data, which is drawn from a specific date each year. This specific date is known as the snapshot date.
Gender pay gap is different to equal pay. The latter is a legal requirement for employers to pay men and women equally if they are performing similar tasks.
Who should report a gender pay gap?
UK employers who have 250 or more staff members on their snapshot date must comply with gender pay gap reporting regulations.
This means that they must publish their company's gender pay gap data on their public-facing website every year.
Why is the gender pay gap reporting important?
There are various reasons why employers should measure and report their gender pay gap information on an annual basis. Some of these reasons are:
- Maintaining an open approach to pay management.
- Helping society to realise the benefits of closing the gender pay gap.
- Addressing the unequal impact of the pandemic on women's earnings in comparison to men's earnings.
The following are the penalties for failing to report gender pay gap information on time and the benefits of early reporting:
Penalties for failing to report the gender pay gap
Failure to report on time or accurately puts organisations in breach of the regulations. This exposes them to the risk of an enforcement action, which may result in court orders and fines.
The government will also publish the names of organisations that failed to report. As well as information on any investigation or enforcement action taken against them.
The gender pay gap service also applies 'late badges' to employers registered within the service.
Benefits of reporting the gender pay gap early
There are several benefits to reporting the gender pay gap as soon as possible after the snapshot date. These include:
- Being seen as a leader in the industry.
- Easy access to the required data for calculating the gender pay gap.
- Better management of key staff required for report preparation and submission.
- Tackling any unexpected issues or complications earlier on.
- Having the ability to take early action to address any identified pay gaps.
Which employees count in the gender pay gap report?
Any person with a contractual employment, on the snapshot date, must be counted in the report. For example:
- Staff with a contract of employment.
- Staff in senior positions.
- Part-time workers.
- Employees on leave or self-isolating.
- Employees who are temporarily laid off.
- Individuals who were furloughed.
- Some self-employed people.
- Partners that are salaried.
You should note that employees are counted individually instead of as full-time equivalents. More description is provided below:
Part-time workers and job sharers
If you use job-share arrangements, every employee in a job-share counts as one employee. For example, if two people share a job, they count as two employees in your headcount.
When an employee has multiple jobs with your company, you can count them as one employee or according to how many employment contracts they have.
Agency workers must be excluded from your headcount and gender pay gap calculations. They will be counted as the workforce of the agency that provides them.
Any individual who works for a service company would be included in the headcount of the service company, not the end user.
Employees on leave
When forming your headcount and calculating the gender pay gap, you must include employees on leave, such as sick leave or maternity leave, who are receiving full pay.
If any of them is on reduced pay because of their leave, they will no longer be considered full-pay relevant employees. They must still be counted in your headcount and bonus pay gap calculations.
If you hire a self-employed individual under a contract to personally work for you, they must be counted in your headcount and gender pay gap calculations.
If you have the required data, they should also be included in your gender pay gap calculations. Data examples include project initiation paperwork and a schedule of fees.
If you don't have the data, you should think about whether it's reasonably practicable to ask the employed person to provide it for you.
The decision to include or exclude partners from the gender gap calculation and headcount depends on the type of partnership you have with them:
Traditional partnerships and limited liability partnerships
Exclude these partners when calculating your headcount and gender pay gap.
Salaried partners, or LLP members who are treated as employees for payroll purposes
Include these partners when calculating your headcount, but exclude them from your gender pay gap calculations.
For apprentices, seasonal, temporary or casual workers, and zero-hours workers, you need to refer to their contract.
The type of contract these workers are under will dictate whether or not you should include them in your headcount and calculations.
They must be included in your headcount and calculations if they are your employees on the snapshot date. You must include them even if they only worked for you for one day before your snapshot date.
Reporting employees who don't identify as men or women
The regulations don't define the terms "men" and "women". The requirement for reporting your pay gaps shouldn't result in any of your staff members being singled out and questioned about their gender.
To reduce the risk of singling out and asking workers about their gender, you should:
- Locate the staff gender identification using employer payroll or HR data.
- If such information is unavailable or deemed to be unreliable, you should set up a system that allows all workers to update or confirm their gender. You can go about this by inviting all staff members to check their recorded gender, and update it if required.
- In cases where the staff member doesn't self-identify as either gender, you may omit the individual from the gender pay gap calculations.
What has to be reported in the gender pay gap report?
Gender pay gap information includes six figures that you must calculate, report and publish. These are:
- Percentage of men and women in each hourly pay quarter.
- Mean gender pay gap using hourly pay.
- Median gender pay gap using hourly pay.
- Percentage of men and women receiving bonus pay.
- Mean gender pay gap using bonus pay.
- Median gender pay gap using bonus pay.
Private, voluntary sector employers, and all other public authority employers must submit and publish a written statement in addition to reporting their gender pay gap figures.
Public authority employers are not required to submit a written statement, except in cases where they are not included in Schedule 19 to the Equality Act 2010.
This statement, which must be signed by an appropriate person, must confirm the accuracy of the information that has been published.
By adding a supporting narrative to your gender pay gap report, you help anyone reading the report understand your view of why gender pay gaps are present. You can also mention what you've already done to analyse and close the gaps.
The narrative report can include the following:
- Explanations for each of the figures in your report.
- An explanation of the difference between unequal pay and the gender pay gap to explain and interpret your findings.
- Workforce statistics, so you can give a wider and more clear picture of why the gaps exist in your organisation.
- The efforts you have already taken to understand and address the gaps.
How to manage gender pay gap reporting
You must use the government’s gender pay gap service for reporting your figures.
Private, voluntary sector employers, and all other public authority employers must use the same service to submit their written statement if they need to.
You must also publish your gender pay gap report and written statement in a notable place on your public facing website.
You may also publish a supporting narrative and an action plan to clarify gender pay gaps in your organisation, although this is discretionary.
Meet your specific date for reporting
There are two deadlines, each with its own snapshot date.
Most public authority employers are required to use a snapshot date of 31st March. They must report and publish their gender pay gap report by 30th March of the following year.
Private, voluntary sector employers, and all other public authority employers must use the 5th of April as their snapshot date. This means that they have till 4th of April of the following year to report and publish their gender pay gap report and written statement.
Create an action plan
An effective gender pay gap action plan will help you understand the pay gaps in your organisation and demonstrate your commitment to closing them.
Ideally, a good action plan would include the following steps:
- Analyse your data and identify evidence driven actions: Before seeking to tackle the average pay gaps, it's important to use data to diagnose what's driving the gaps in your organisation.
- Engage your stakeholders: Your stakeholders may be very helpful in making sure you understand the consequences of pay gaps and the best course of action. Try to gain their support.
- Revise, assess and embed your action plan: Your action plan needs to be monitored and evaluated, and it should be modified as necessary.
- Allow enough time for the process: Developing an effective action plan is a continuous and iterative process. It takes time to carefully assess the route to take and to refine the content so that it reflects the issues causing the gaps.
Get advice on gender pay gap reporting from Peninsula
The gender pay gap reporting regulations were introduced to make it a legal requirement for employers to take action to report any gender pay gaps within their organisation.
Failure to report puts organisations in breach of the regulations which could result in court orders and fines.
Peninsula offers 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.
Want to find out more? Contact us on 0800 051 3687 and book a free consultation with one of our HR consultants.