Mind the (pay) gap

Carol Shaw

What does it mean if a pay gap is found within your organisation?

Businesses with more than 250 employees had been set a date of 5 April 2018 to mandatorily report on the gender pay gap within their organisation. That date has now passed, which means businesses should be aware as to the scale of the issue they face.

Before we look at what it means for businesses having uncovered a gender pay gap, let’s briefly re-cap on what was required as part of this mandatory reporting.

Brief re-cap
Mandatory gender pay gap reporting for large employers came into force on 6 April 2017. As part of this, employers with 250 or more employees were then obligated by law to analyse their gender pay gap and publish details of it by the 5 of April 2018, and then again every year following.

So, what do the gender pay gap reports need to contain? Well, the requisite information is as follows:

• Figures for ‘relevant employees’, calculated by using both the mean and median average hourly pay.
• The proportion of men and women in each of four pay bands (called quartiles) based on the employer’s overall pay range.
• Information on the employer’s gender bonus gap.
• The proportion of male and female employees who received a bonus in the same 12 month period.
• A written statement signed by an appropriate senior individual, confirming that the published gender pay information is accurate.

Not only do the reports need to be uploaded here (https://www.gov.uk/report-gender-pay-gap-data), but they also need to be on employers’ websites. The report must be kept online and publicly available for three years.

For future reference, employers should bear in mind that, just because the deadline to submit the report is the 4th of April every year, it doesn’t mean that you have to wait until then. It is, of course, possible to submit the report well in advance of the deadline. It should also be compiled in a timely manner, allowing sufficient time to look at the data and carefully assess how big the gap actually is.

The big thing to bear in mind though, if there is a gap, is that it’s available for employees to see as well as the wider public.
Many businesses were publicly shamed by the media, with a top ten of firms revealed to include Millwall Holdings PLC, GoToDoc, Boux Avenue, Fusion People, Ryanair and more, all of which reported a mean hourly pay gap larger than 70%. Many law firms have also published significant mean hourly pay gaps.

The worst offenders have clearly suffered from bad publicity off the back of this, with all major media outlets reporting on the scale of the gap.

But it’s not just the associated bad publicity that have buffeted businesses. Internally, disgruntled employees have voiced dismay at the gap within their organisation. Businesses that find themselves in this situation should, ideally, have provided a written narrative alongside their report to explain any gaps and disparities, while setting out a proposed plan of action to address the issues uncovered.

If you have a gender pay gap and you haven’t taken any steps to outline how you plan to remedy it, then consider whether you should do so. Prepare to be challenged by your employees on the robustness of your response. The idea behind gender pay gap reporting is that businesses can take the appropriate steps to close it. Failure to act can have some serious consequences.

Possible consequences of a gender pay gap
Whilst the publication of the gender pay report and the subsequent discovery of a gender pay gap does not establish any unlawful practice on the part of any employer, either in relation to equal pay or sex discrimination, it may raise questions among the workforce as to why this exists.

If, as an organisation, you find yourself with a significant issue, it’s worth bearing in mind a Supreme Court judgement from last July, which ruled tribunal fees are unlawful. The result of this means employees no longer have to pay to issue a claim against their employer. All that is now required of them is to complete a relatively straightforward claim form online. Therefore, employers may now find themselves facing a multitude of claims. And if an employee is successful in an equal pay claim, they could be awarded up to 6 years’ back pay as well as interest on the monies owed.

An employer who finds itself in this situation, where a large number of employees are affected, may find that the back pay and interest owed amounts to a tremendous amount of money. The settlement of such claims could result in serious financial consequences to the employer’s business. In Asda Stores Ltd v Brierly and Others for instance, it is estimated that the value of employees’ six years’ back pay could be in the region of £100 million!

By ensuring that there are lawful reasons for the gender pay gap, which are explained, employers will help to reassure employees that there are non-discriminatory reasons for the gap.

Carol Shaw is director and head of employment law at Spratt Endicott Solicitors, a Legal 500 Law firm, who has more than 36 years’ experience of practising employment law.