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DAC Beachcroft Adviser: Gender pay gap reporting

Published On: 12 March 2015

Gender pay gap reporting to become mandatory in the next 12 months for companies with 250 or more employees.

On Friday 6 March 2015, Liberal Democrat Leader, Nick Clegg, secured a government amendment to the Small Business Bill, which will fast-track plans for gender pay transparency.

Section 78 of the Equality Act 2010 contains a power for the government to make regulations requiring mandatory gender pay gap reporting. Until now, this power has laid dormant. Instead a voluntary approach was favoured under the Think, Act, Report regime. However, although many companies signed up to Think, Act, Report only five have chosen to publish their gender pay gap findings. It’s against this background that, despite years of Conservative resistance, mandatory gender pay gap reporting is being brought in.

The new measures, which are expected to be introduced within the next 12 months, will only apply to companies with 250 or more employees. It is expected that these companies will be required to carry out an equal pay review and publish its findings on an annual basis. As a bare minimum, companies will be required to review and publish the gender pay gap for full-time and part-time employees as well as the overall pay gap.

The precise details of the new measures will be subject to consultation. It is anticipated that employers will face a fine in the region of £5,000 for non-compliance. Employers are also likely to receive negative publicity should they fail to comply.

What this means for employers

Companies that employ more than 250 people now have a year to get their house in order before they have to publish gender pay information. The starting point will be to review samples of the workforce to see if there is a gender pay gap and, if so, what this is. Employers may wish to use legal privilege to assess the gap so that the initial findings will not need to be disclosed in any future litigation arising from the published data.

This sampling may well reveal reasons not related to sex for any gender pay gap such as market forces. While employees may not read the finer detail of the published statistics, understanding the reasons for any gender pay gap will enable organisations to answer any initial grievances, and will also assist with managing the internal and external PR issues which are likely to arise once the data is published.

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