How should employers respond if the EHRC threatens a gender pay investigation?

Annelise Tracy Phillips, senior associate at Burges Salmon, looks at some of the problems enforcing the gender pay gap regulations, and what employers should do next if they have received notice from EHRC of non-compliance.

It’s been a few weeks now since the deadline for publication of employers’ gender pay data for the year ending April 2017.

Shortly afterwards, the Equality and Human Rights Commission (EHRC) announced that more than 1,500 employers had failed to comply with their reporting obligations.

It wrote to them, reminding them of their obligations and requiring them to publish their data within 28 days. Over 400 employers responded, either by confirming they will publish their data or asserting that the regulations do not apply to them.

The next stage for employers that, in EHRC’s view, have failed to comply with their obligations, will be an investigation under Section 20 of the Equality Act 2010. The first tranche of investigations are set to start in early June 2018.

If the EHRC finds that the employer has committed an unlawful act by failing to report their gender pay data then, as well as naming and shaming the organisation on its website, it will require the employer to prepare an action plan to remedy the situation. A failure to do so can result in an unlimited fine.

What happens now?

So far, so straightforward. However, the difficulty facing both employers and the EHRC is that there is no reliable source of data as to which employers are actually obliged to publish their gender pay data under the regulations.

The threshold for reporting is 250 or more employees and there are many potential reasons why it’s not immediately clear whether an employer is caught, such as:

• A workforce may fluctuate in numbers if seasonal workers make up a significant proportion. The regulations apply to employers who have 250 or more employees as at the snapshot date of 5 April in any year. If the employer has less than 250 employees at that date then even if during other periods of the year it has many more it will be not be required to report its data.
• Reporting is by legal entity so if there are many legal entities in a group, all of which have fewer than 250 employees, none will have to report their data even if, taken as a whole, the group has more than 250 employees.
• Where an organisation employs large numbers of agency staff and they are contracted to the agency rather than to the employer they will not count towards the employee numbers.
• Some employers have overseas workers (including in Northern Ireland or the Isle of Man). These employees only count towards the threshold number of 250 if their contracts are sufficiently closely connected with Great Britain. This can be very fact specific.
• “Employee” for the purposes of the regulations can include self-employed contractors – not normally counted by employers as “employees”.

There is plenty of room for confusion (and dispute) as to whether an individual employer is caught by the obligation to report its gender pay data.

Employers that receive a letter from the EHRC will be well advised not to ignore it but either to confirm they will report their data or to explain why they don’t think they are caught.

Future challenges

For the next reporting year (beginning April 2018) the EHRC has confirmed that it will extend its focus from non-compliance to inadequate or incomplete compliance. This is likely to present even greater difficulties for all.

The regulations are not a model of clarity. The (non-binding) ACAS guidance is helpful but it doesn’t cover all the grey areas.

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Employers who did publish their data this year should record how they compiled their figures, the assumptions they made and the interpretation they adopted so that when they publish next year’s data they follow the same methodology.

Next year’s data will have to be published alongside the data for 2017 to facilitate a comparison so it is as well to be comparing like with like. If necessary, they can explain the approach they adopted and the reasons why to the EHRC if challenged.