Gender Pay Gap Reporting

Gender Pay Gap Reporting

It’s the time of year when you’re likely to see a lot of information about companies’ gender pay gaps.

Why do it?

Gender Pay Gap reporting shows differences in pay between men and women when reviewed at an organisational level. The benefit of requiring companies to report their gender pay gap is that they must analyse and publish every year, in a standard way. It brings the data into the light.

This encourages a company to consider why the gaps might exist and what they could do to address the issue. It’s about pay, but also about other factors, such as occupational segregation, or the fact that in the main it’s women who look after children or other dependants, working part-time or taking career breaks to do so. It’s a measure of the situation for the whole company. It’s not the same as Equal Pay, which ensures companies compare like-for-like roles and ensure equal pay for equal value.

Across the UK, the gender pay gap has been declining slowly over time; over the last decade it has fallen by approximately a quarter among full-time employees, and in April 2023 it stood at 7.7%.

However, even with this scrutiny and focus, not everything is consistently moving in the right direction. The gender pay gap increased by a small amount between 2022 and 2023, although the gap is still narrower than in 2019.

The gender pay gap reduces women’s lifetime earnings and also affects their pensions – this is one of the significant causes of poverty in later life for women.

Interestingly, the EU is planning to copy the UK’s process. A new EU directive was issued in 2023 to introduce the UK’s style of gender pay gap reporting across all countries in the EU from 2027, because the UK’s process was felt to be the most robust mechanism to provide data that could be compared between companies and industries.

The UK rules

Any employer with 250 or more employees must publish their gender pay gap data each year, with a deadline of 30th March for most public authority employers, and 4th April for all other organisations. The data (and the explanation) is then publicly available on the UK government website, so companies always want to ensure their data looks good, or if not, that they have an explanation that sounds plausible!

The data that must be reported is

  1. The difference between the mean hourly rate of pay of male and female relevant employees;
  2. The difference between the median hourly rate of pay of male and female relevant employees;
  3. The difference between the mean bonus pay of male and female relevant employees;
  4. The difference between the median bonus pay of male and female relevant employees;
  5. The proportion of male and female relevant employees who were paid bonus pay during the bonus pay period; and
  6. The proportions of male and female relevant employees in four pay bands.

So, it is fairly onerous to calculate.

Most companies then also provide a verbal explanation of their data, including trends or notable elements within their organisation, that help an external party to make sense of the data.

The headline gap – the first figure – is the one that gets talked about the most. This indicates the extent to which women earn, on average, less per hour than their male counterparts. On occasion, a company may report a negative gap. This would show the extent to which women earn, on average, more per hour than their male counterparts. This may happen, for example, if an organisation employs a high proportion of men in low-paid, part-time work, and/or their senior and higher-paid employees are women.

There is no obligation to publish a narrative explanation of the figures, but it makes sense to do so. It’s an important data point that a company’s own employees want to understand, but potential employees, customers, suppliers etc can all view it too. For example, if a company’s gender pay gap is 20% but their competitor’s is 10%, potential employees might be concerned. So, it’s good to explain! In addition to the explanation, it may also be useful to include an action plan to show what is being planned to iron out the gap.

And since an organisation’s own managers and employees may also be interested in the result, it pays to have a communication plan ahead of publication, considering how they want to share the information and the narrative with them.

What to be thinking about if you have overseas entities

The process to implement the EU Directive will require national legislation in each country to be introduced by June 2026. So there’s plenty of time.

However, if your company has operations in other countries across Europe, it will help to be prepared early – there are considerations such as the different legislations in each country, your mechanisms to gather the data, considering reporting obligations and data protection legislation etc. You might also want to conduct an internal gender pay audit now to identify any gaps and take steps to close it before the first report has to be made.

So, if your company is getting close to 250 employees, or if you have overseas operations, it pays to be prepared.

And if you have 250 employees already, you’re probably already preparing your submission for this year’s reporting deadline!

But if you’re not, please grab some time in my calendar or give me a call!