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What is the Gender Pay Gap and how do we measure it?

17 August 2015 #Employment


The Government is committed to ensuring that every person realises their full potential and considers that gender equality will help achieve this.  The consultation came as a surprise as it was not expected that a Conservative government would pursue gender equality as a priority.  However, on reading the consultation and the background research undertaken by the Women’s Business Council, it becomes clear that the economic benefits of increasing the engagement of women at work are the driving force of the Government’s strategy in this area.

What is the Gender Pay Gap?

It is not Equal Pay. Equal Pay only arises where men and women are receiving different pay despite undertaking the same work or work of equal value. The Gender Pay Gap is a much broader concept. The Gender Pay Gap is simply the difference between the average rate of pay of men and women. It is reflected as a percentage. It doesn’t necessarily take account of differences between roles.

The Office of National Statistics reports the national gender pay gap as 19.1%. This means that on average for every £1 a man earns, a woman earns 80 pence. Putting it another way, women work for free from 4 November until the end of the year; the 4th of November is therefore marked as Gender Pay Gap day.

The Governement proposes to require all UK employers (including in the voluntary sector) with at least 250 employees to publicly report the gender pay gap in their organisation. By setting the threshold at 250 employees’ it means that 40% of the UK workforce would be covered. The consultation seeks views on whether 250+ employees is the right threshold. 

The proposal is to define employees for the purposes of this exercise as traditional employees, apprentices and others who work under a contract personally to do work. This latter category would cover casual workers and also potentially some contractors.

How do you measure the Gender Pay Gap?

The figure used by the ONS is based on the median hourly rate of full-time employees ignoring any overtime. The rationale behind this approach is that men generally work more overtime than women and so that would skew the results. Conversely, it’s arguable that the fact that men generally work more overtime is another symptom of gender inequality and so should be taken into account.

Similarly, the ONS statistic ignores part-time workers. Indeed, a separate national gender pay gap figure is reported for part-time workers and this is currently at -5.5%. In other words, part-time women typically earn more than part-time men, but then of course substantially more women undertake part-time roles.

Finally, in relation to the ONS statistic, this is based on median pay, not mean. Again, this is to avoid skewing the result by including a small number of extremely highly paid executives. The median approach avoids this result.

Although not included as one of the specific questions in the consultation, we would encourage organisations to give their views to the Government in the consultation on whether or not the appropriate measure should be the median hourly pay excluding overtime of full-time employees or some other approach.

One of the key areas the Government is seeking views on is whether the Gender Pay Gap should be measured at a high level and simply compare average hourly rate of all men in the organisation against all women, whether it should be broken down by full-time and part-time or by grade or job type.

How should organisations disclose their Gender Pay Gap statistics?

Another key area where the consultation seeks views is in relation to the actual disclosure. Firstly, where should be information be published, for example on the employer’s website, or at their main place of business. Secondly, should the Regulations require organisations to provide a statement with the gender pay gap figure to explain the context, any identified reasons for the gap, what steps the employer will take to reduce any gender pay gap. The Government wants to know whether such narrative should be mandatory and prescribed in the regulations, completely voluntary or voluntary but set out in non-statutory guidance.

Finally, the Government wants views on timescales. The regulations will be implemented during the first half of 2016, but the Government has no firm view at this stage as to when organisations covered by the regulations will be required to first report the gender pay gap. Views are sought on how long organisations need to organise their data such that the required reports can be produced, whether there should be phased implementation (similar to the pensions auto-enrolment regime) and on whether the reporting date should be the same for all organisations or be organisation-specific, for example by linking it to the organisation’s year end. Also, on timings, the Government is seeking views on how frequently the gender pay gap should be reported. The reporting will be no more frequent than annually and so once a year is an option, but alternatives include every two years or every 3 years.

The consultation closes on 6 September 2015 and a response is expected this winter.

Clarkslegal will be submitting a response to the consultation.  If you would like to submit your views to us to incorporate into our response, please email nhussain@clarkslegal.com.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Helen Beech

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