Gender Pay Gap Regulations must be reviewed before April 2022.  Could reform of pay reporting requirements be in the pipeline?

An uncertain picture

This year’s gender pay gap reporting deadline fell in October rather than April.  The delay, like the suspension of reporting in 2020, was due to the pandemic.  Recent analysis of this year’s figures shows a marginal decline in the UK’s gender pay gap to 13.1% (down from 13.3% in the 2019/20 reporting year).  Questions have arisen as to how representative these statistics are in light of the exclusion of many furloughed workers.  Given the gendered economic impact of the covid pandemic (with significantly more women than men being furloughed), a marginal narrowing of the gender pay gap in keeping with prior year trends, seems unlikely.  (Click here for further discussion on the impact of the pandemic.)

Drive for change

Since their introduction, the Gender Pay Gap Information Regulations have attracted considerable scrutiny, with Government committees and industry bodies calling for change.  In the early days of reporting, reform seemed unnecessary: pay reports attracted considerable media interest and the risk of reputational damage, either for non-compliance or for publication of large gaps, acted as a sanction in itself.  More recently, as conclusions from statistics have become less easy to draw, given the impact of furlough, the conversation around pay gaps has petered out.  The time is right to ask whether pay gap reporting obligations in their current form are fit for purpose.

Is reform on the cards?

The Government resisted early calls for change to gender pay gap reporting requirements but built into the Regulations is an obligation to review their impact, including an assessment as to whether the Regulations have achieved their objective.  That review must be completed by 1 April 2022, five years after the Regulations came into force.  

What changes might be considered as part of the review?

Extension to smaller employers: Currently only employers with 250 or more employees are caught by the obligation to publish gender pay gap statistics.  At the time the duty was introduced, it was considered that the obligation to report would be unduly burdensome for small and medium sized businesses.  Companies with 50 or less employees would be particularly sensitive to staff changes, with individual appointments, promotions or departures having the potential to cause a notable statistical impact.    However, excluding companies with fewer than 250 employees, means that the UK’s gender pay gap is calculated using the data of only roughly 50% of the UK’s workforce.  Widening the scope of the regulations would be a step towards greater transparency.

More forensic reporting: Breaking down statistics into pay quartiles provides a more nuanced picture of an employer’s pay gap.  For employers with sizeable gaps, this tends to reveal a higher proportion of men in the top quartiles and a higher proportion of women in lower quartiles.  A more detailed breakdown (for example into pay deciles) would provide a clearer picture of the point at which women’s progress stalls.  This, in turn, would allow employers to identify targeted actions to bring about change.

Mandatory action plans: A new requirement to prepare an action plan would shift the focus from simply reporting the problem, to identifying constructive measures to address it.  The Government Equalities Office guidance already lists the benefits for employers of publishing an action plan.  Making such plans mandatory would be a progressive step.

Publication of part-time pay statistics: The prevalence of women performing part-time roles is regularly cited as a major contributor to the gender pay gap. Part-time work can be perceived as less valuable attracting lower status and slower wage growth.  A requirement to publish the gap between full time and part-time pay would shine a light on any inconsistencies in employer pay policies, which unfairly penalise women.

Enforcement measures: The Regulations do not provide for sanctions against employers who fail to comply with their duty to report.  This has long been a source of contention.  It is possible that the review could result in a new power to fine employers who fail to publish their statistics or who publish inaccurate statistics.  An alternative approach might be to require employers to include gender pay gap statistics in their annual report which would require the data to be audited prior to publication.

Consistent, representative, comparable statistics

While many of the above changes would strengthen the current regime, it could be argued that the biggest threat to gender pay gap reporting is the disruption of the past two years.  The continued effectiveness of the regime cannot be achieved without a consistent requirement to report accurate, comparable and representative datasets, regardless of other external challenges facing the business.