Annelise Tracy Phillips, senior associate at Burges Salmon LLP, looks at what employers should be considering when publishing their gender pay gap data
The Government's consultation 'Closing the Gender Pay Gap' runs until the 6 September 2015. In it, the Government seeks views on the practical aspects of its proposal to require employers with more than 250 employees to publish gender pay data. The obligation to publish is expected to go live in September 2016.
Whilst recognising that many of the causes of the gender pay gap (which remains at 19.7% when part-time workers are included) exist as a result of wider social and economic factors rather than at an organisational level, it is also the Government's view that greater transparency will encourage employers to consider what can be done to close any pay gaps within their organisations. At the same time, it recognises that there will be costs associated with the requirement to report as well as the potential for unintended consequences for employers.
The consultation seeks views on how the data should be presented, at what level of detail, where and how often. It recognises the tension between requiring employers to provide broad brush figures, which may be of little use and can present a distorted picture, and the cost and risk of requiring employers to present data broken down by grade or job type.
Whatever format and level of detail is eventually decided upon it is clear that for many employers, the data, when published, will show gender differences. Having a gender pay gap does not, of itself, mean that the employer has breached any legal requirements but it will put the spotlight on the organisation's pay practices and could make disgruntled employees more likely to bring claims.
Types of Audit Processes
Employers need to look at how they will comply with the requirement to publish. Firstly consider whether you will be able to collate the necessary data - if not, you will need to review pay systems to address this. Secondly, is the data likely to highlight a pay gap? If so, you will need to identify potential problem areas, establish the reason for any differentials and, if not justifiable, take action to address them.
Audits can be time-consuming so one option is to carry out some 'snapshots' focussing on areas of specific concern. Alternatively, if a whole business audit is preferred, it can be conducted using existing grades or job families. Organisations which have the relevant data could also widen the audit to encompass other protected characteristics such as ethnic origin or disability. The most comprehensive check would be to carry out a full analytical job evaluation exercise and roll out a matching pay structure.
Relevant Factors to Consider
Which option is most appropriate for each organisation depends on a number of different factors which include:
- Business strategy - where would an audit and potential pay review fit within the wider people strategy of the business including in terms of engagement, turnover and retention. What is the fit with the business’ overall diversity and inclusion strategy?
- Brand – what are the risks to the brand of a negative reaction to publication, both externally and in terms of employee engagement?
- Stakeholder buy-in – the audit will have to be funded and resourced as will the cost of rectifying potential problem areas.
- Sources of data and data integrity -often, upon beginning an audit, employers discover that they do not hold all of the relevant data or that the data they hold is not accurate and a data cleansing exercise is needed.
- The risk profile of existing pay structures – if existing pay structures are entirely lacking in transparency or consistency then time will be spent better addressing this first. If pay systems are clearly structured and transparently applied then a snap spot check may be all that is needed.
- Employee landscape - to what extent is it appropriate to involve employees and their representatives in any process?
- Legal risks – both in relation to existing pay structures and policies and the actions which may be necessary to change them. Employers need to be aware that documents created as part of any audit process can be disclosable as part of subsequent litigation. Confidential documents created for the purposes of legal advice and communicated between lawyers and their clients are generally privileged so they do not have to be disclosed if a claim is brought. Involving lawyers in the audit process can help keep it confidential.
These and other factors will shape how an organisation prepares for the requirement to publish but whichever option is chosen it is clear that doing nothing is the least effective one.
Annelise Tracy Phillips is a senior associate at Burges Salmon LLP, experts in employment law.