Smaller Employers May Face Gender Pay Gap Reporting

MPs on the Commons Business, Energy and Industrial Strategy (BEIS) committee are calling for more UK companies to be required to complete annual reports on their gender pay gap.

Under laws introduced last year, organisations with at least 250 employees must publish annual data on the median and mean hourly pay of workers at each level of their team, broken down by male and female wages. In addition, reports must state the proportion of men and women in each quartile pay band and the difference in average bonuses paid to male and female staff.

The legislation aims to improve professional and economic equality in the UK by holding companies and public sector organisations accountable for their treatment of employees.

Results for all affected employers are available for the public to access, via the government’s online search tool. These requirements could now be extended to employers with only 50 or more workers, if the BEIS committee’s new report is heeded.

The MP committee is pushing for smaller employers to be included after it emerged that pay gap inequalities were on average the most pronounced in smaller companies. Rachel Reeves, chair of the parliamentary committee, said of the issue that “transparency on gender pay” was “only …the first step” in addressing employment inequality in the UK.

Reeves emphasised that: “The gender pay gap must be closed, not only in the interests of fairness and promoting diversity at the highest levels of our business community, but also to improve the country’s economic performance and end a monstrous injustice.”

First pay gap results highlight room for improvement

The first annual results for gender pay gap reporting were published by employers this April.

The documents revealed that three quarters of large, UK businesses paid their male employees more than their female staff, with an average median pay gap of 9.7%.

Results showed that employers’ highest paid quartile of staff on average consisted 63% of men, indicating that men are still more likely to hold higher paid roles within most companies. The BEIS report offers a number of recommendations highlighting the ways in which pay gap reporting can be improved for next year.

The committee acknowledged that it was useful to adopt a “big bang” approach in the first round of reporting this year – when all organisations’ results were published on the same day to maximise media impact. However, it has suggested that going forward, employers be permitted to include reports in their annual reports, to save money.

Additionally, the BEIS committee recommended that employers be required to include strategies in their reports outlining their plans to tackle the gender pay gap, with those whose results do not improve year on year potentially subject to penalties.

MPs on the committee reasoned that if such strategies were not incorporated, the impact of the reports on workplace equality would quickly diminish, after the “novelty” of publicising companies’ pay data wore off.

Open discussion of plans of action would also aid employers to avoid “misinterpret[ing]” company results and their implications.

Diversity adviser Claire McCartney of the Chartered Institute of Personnel and Development recommends that if this requirement is implemented, companies should “take the time to understand the reason why the [gender pay] gaps are there, think about what needs to be done sustainably to reduce them and then take meaningful action.”

Government publishes employer guide to tackling pay gap

Coinciding with the Parliamentary committee’s report, in August the Government Equalities Office published a guide to “What Works” for employers in closing pay disparities.

The department’s recommendations include that more than one female candidate be included in shortlists for recruitment and promotions, as well as the adoption of more structured, objective interview techniques.

Rather than simply asking questions in an unstructured format, employers should use standardised, skill-based tasks to assess candidates. Organisations should also ensure to include negotiable salary ranges when advertising roles, the government guide recommends.

According to the Equalities Office, which is responsible for collecting gender pay gap data, these tactics “have been tested in real-world settings and found to have a positive impact.” By contrast, the guide notes that other equality promotion techniques, such as unconscious bias and leadership development training, have not proved as successful, only achieving “mixed results.”

Employment law advice for employers

Our employment lawyers provide advice on the employment aspects of all major business decisions including legal requirements for reporting salaries, policies and contracts, employer obligations TUPE, settlement discussions and agreements and workplace dispute resolution and mediation. For advice, please contact a member of the team on 03456 381381 or email employment@ibblaw.co.uk.