Legal Q&A: Voluntary gender pay reporting

Voluntary gender pay reporting is part of the Government’s strategy to promote equality through “transparency and behavioural change”. The strategy includes positive action, promoting women onto the boards of listed companies and taking strong action on pay discrimination through equal pay claims and the public sector equality duty.

What is voluntary gender pay reporting?

Voluntary gender pay reporting is intended to be an alternative to the mandatory provisions contained in s.78 of the Equality Act 2010. Under s.78 large employers would be required to “publish information relating to the pay of employees for the purpose of showing whether there are differences in the pay of male and female employees”. There are no immediate plans to implement these compulsory provisions, but they remain for future use depending on the effectiveness of the voluntary scheme.

Under the voluntary scheme, there will be an annual review of the number of employers reporting and the quality of the reporting. The scheme will be aimed particularly at private and voluntary sector organisations with more than 150 employees. The Government Equalities Office will not seek prosecutions where statistics disclose inequalities, but will want to see action being taken to address potential problems. The respective roles of the Equality and Human Rights Commission (EHRC) and the Equalities Office are not finalised yet, as discussions are ongoing. Details of to whom employers will be reporting and who will be carrying out the annual review are expected in the next few weeks.

Why participate in voluntary reporting?

From an employer’s point of view, the implementation of the mandatory scheme should be avoided as it could be heavily prescriptive and public and criminal sanctions could apply for failure in certain circumstances.

Voluntary gender pay reporting gives employers discretion to conduct their own audits, report as they see fit and take corrective steps without fear of reprisal.

Gender pay equality is a heavily contested topic. Generally, the proportion of male and female professionals in any market is equal up to a certain level, but tapers off at senior management and board level in favour of men. Equal pay figures are further affected by the fact that support and part-time roles are more often populated by women.

Unequal pay can arise and be perpetuated unintentionally due to historical pay practices. Actively understanding why certain people or roles attract different pay levels is necessary for employers to remove any such inadvertent pay discrepancies. Given the emphasis on transparency, employers should be familiar with the reasons for pay differentials and ensure that those reasons remain valid.

In 2010, Speechly Bircham teamed up with Kings College HRM Learning Board to survey 550 HR professionals, representing a workforce of more than 2 million. A massive 84% of the respondents did not consider there to be any gender pay issue within their organisation, but only one-third asserted that they have procedures in place to measure it.

Gender pay inequality is going to be a spiralling problem as the Government continues to probe and as individuals show greater willingness to take legal action in relation to it. Under the Equality Act 2010, the new right to claim compensation for pay differences as a sex discrimination claim, rather than as an equal pay claim, will assist employees.

A business that can demonstrate that it either has no gender pay disparities or has an active agenda to promote equality in all areas, including pay, will be an attractive proposition to potential employees, partners and customers.

How effective will the voluntary reporting scheme be?

Given the fact that many large employers are already thinking about diversity measures, the latitude which the voluntary scheme offers to employers to control their statistics is attractive. An employer that audits its pay schemes will be implementing actively its equal opportunities or diversity policy. The EHRC has invested significant time in proposing a menu of reporting options, consulting over gender pay reporting and inevitably has an interest in its success. Larger employers should see the long-term benefit of voluntary reporting. One thing for sure is that employers will want to avoid the compulsory scheme, which could still be brought in if the voluntary scheme fails.

Emma Bartlett is a partner in the employment team at Speechly Bircham LLP

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