Gender pay gap reporting – UK

• United Kingdom

• Employment law

17-02-2021

Gender pay gap reporting came into force in the UK on 6 April 2017, requiring employers with more than 250 employees to annually report on certain information in relation to gender pay. This briefing will consider the latest requirements and potential future developments.

Gender pay gap reporting: as it stands

The deadline for employers to report their gender pay gap information is the same every year: midnight on 30 March for public sector employers and midnight on 4 April for private and voluntary sector employers. However, on 24 March 2020 the government took the decision to suspend the enforcement of gender pay gap reporting for the year 2019/20. This was due to the pandemic and meant there was no expectation on employers to report their data last year. On 23 February 2021, the government announced that the suspension of enforcement has now been extended to 5 October 2021.

In December 2020, the government issued new guidance on gender pay gap reporting, now including information for employers impacted by the pandemic, in particular relating to employees on furlough leave as part of the Coronavirus Job Retention Scheme (CJRS). The Equality and Human Rights Commission has also published separate guidance.

In light of the most recent government announcement, employers will need to carry out gender pay reporting this year. However the time for doing so is extended until 5 October 2021 for the 2020/21 reporting year. The snapshot dates of 31 March 2020 and 6 April 2020 will remain applicable.

Latest gender pay gap figures: now at 15.5%?

Data from the Office for National Statistics (ONS) published in November 2020 demonstrated that the gender pay gap among all UK employees had fallen to 15.5% by April last year, down from 17.4% in 2019. However, with figures for the same period showing that more men than women had been placed on furlough, there are concerns that the ONS data may be distorted by the pandemic. Instead, the reduced pay gap could be attributed to the temporary reduction in pay for a higher percentage of male employees, rather than demonstrating any longer-term significant downward trend.

The doubts about the latest ONS gender pay gap figures and suspension of reporting last year, coupled with evidence of the disproportionate economic effects of the pandemic on women (see our briefing Coronavirus - Disparate gender impact) has resulted in concerns that the progress made in gender pay equality in recent years could be quickly lost. This, together with the potential for gender pay equality to slip off the agenda for employers as they strive to meet the demands of the pandemic, has resulted in calls for the reinforcement and extension of reporting obligations.

Reporting obligations: what should employers be doing now?

Qualifying private sector and public sector employers will need to report this period’s gender pay gap by 5 October 2021, based on the snapshot date of 5 April 2020 (31 March 2020 for public sector employers).

Our previous briefing, gender pay gap reporting UK briefing, explains the requirements in more detail. Those requirements remain unchanged, except that there are some notable new additions to the government guidance in relation to employees on furlough leave under the CJRS and action plans.

Relevant employees for pay gap reporting: what about employees on furlough leave?

The CJRS was announced on 20 March 2020, with claims permitted for furloughed staff extending back to 1 March 2020 for jobs that had already been furloughed in the period 1 March to 19 March 2020. With ONS figures showing that throughout April 2020 the number of employments furloughed was at its peak, at over 8.5 million, the pay data of many employers for the 2020/21 reporting period will clearly be impacted by furlough leave. Further, with the CJRS now extended until 30 April 2021, furlough will also impact the figures for next year too.

The new government guidance seeks to address the issue of employees on furlough, to mitigate its impact on the data. It confirms that employees who were furloughed under the CJRS on the snapshot date will count as relevant employees when determining the employer’s headcount. However, unless salaries were topped up to the usual full pay during any furlough period, furloughed employees should not be included in the calculations relating to mean and median hourly rates of pay, and the proportion of male and female employees in each hourly pay quartile.

However, furloughed employees should be included in the calculation of the gender bonus gap, regardless of whether they were receiving full or reduced pay on the snapshot date. Therefore, all employees on furlough should be included in the calculations for the percentage of men and women receiving bonus pay and the mean and median gender pay gap using bonus pay.

Minding the gap: action plans

The government guidance encourages employers to publish an action plan, to explain how the business intends to tackle any gender pay gap. This can either be published as part of the supporting narrative or alongside it.

In the absence of any legal obligation to include action plans, it is anticipated that some employers may shy away from publicly publishing plans. However, the use of an action plan can be an effective way of demonstrating a genuine commitment to improving a gender pay gap and help to bring the necessary focus and accountability to the chosen approach. Further, employees will often expect to see an action plan to give credence to commitments to drive change and with gender pay gap reports publicly accessible, there may be reputational risk if an action plan is not included.

The benefits of a voluntary approach have been highlighted by those employers who have continued with gender pay reporting despite the government suspension, enabling those employers to maintain momentum on their diversity and inclusion initiatives and demonstrate transparency. Again, although under no legal obligation to do so, many employers have also started reporting on ethnicity pay.

On the horizon: potential future changes to pay gap reporting?

A formal review of the gender pay gap reporting legislation will take place in 2022, at which point it seems likely that a number of changes will be made. With a new equal pay bill introduced into parliament last year and a push for reform from other directions, amendments to the existing position seem inevitable. The proposals include the lowering of reporting thresholds, a legal requirement to publish an action plan to make the changes necessary to tackle gender pay gaps and pay gap reporting being expanded to include ethnicity reporting.

In the meantime, employers should press ahead with gender pay gap reporting for this year based on current requirements, potentially using the extended time to do so as an opportunity to report on a wider basis to include ethnicity pay too. With the evidence to date demonstrating that reporting is a useful driver of change and facilitates workers to start a conversation with their employers about pay disparities, reporting should be a key part of any diversity and inclusion strategy.

Our specialist legal advisers and consultants have a vast amount of experience in helping employers navigate through pay gap reporting requirements. From advising on the report itself to undertaking a comprehensive risk assessment, data analysis and root cause diagnosis and producing practical action plans to prepare to report pay gap results externally, our experts offer advice and practical support tailored to the particular needs of the organisation. Our services are subject to legal professional privilege, as appropriate.