Annelise Tracy Phillips, senior associate at leading UK law firm Burges Salmon, talks to Reward about the implications of companies publishing their gender pay data.
What are the legalities around the publication of the gender pay gap?
The Small Business Employment and Enterprise Act requires, within 12 months of 26 March 2015, the Secretary of State to publish regulations that enforce the publication of gender pay data.
These regulations will apply to employers of more than 250 employees and will require them to publish data that sets out their gender pay gap.
As yet we don’t have the full detail of how that gender pay data will be published or how regularly but we know that the regulations are coming within the next 12 months and will set out the detail. The obligation to publish the gender pay data is likely to impact between 18 months and 2 years from March 2015.
What will the implications be for business?
Businesses don’t generally set out to pay people differently based on their gender but pay equality is more complicated than simply paying people the same amount for doing the same work. Workers also have the right to be paid the same if they’re doing work of equal value. That value is determined in terms of skills and demands of the role, which means that two employees who are carrying out different roles may be able to argue that their roles are of equal value. There are systemic inequalities in the economy and society, which mean jobs traditionally undertaken by men attract higher pay, and that men and women carrying out work of equal value may end up receiving different pay.
Additionally, many employers acquire their staff through taking over other businesses so didn’t originally set their original pay rates, which may not be consistent with those of the rest of their workforce.
Finally, the pay comparison is of each term separately, which means organisations that have legacy benefits and allowances (the reason for which are lost in the mists of time) cannot necessarily argue that the overall package is comparable.
So employers might have a workforce where there’s been no intention to pay differently based on gender, but for external and historical reasons there may be a gender pay gap that may now have to be disclosed.
Should the new regulations encourage employers to do a payment review now?
Employers should certainly consider auditing their pay policies and practices, and whether they want to audit the pay of groups of workers. Such audits would help to identify issues and employers can put in place strategies for addressing any gap in advance of the data publication date.
Employers do need to be careful when conducting audits of this nature, however, to ensure they don’t inadvertently create documents that could be potentially disclosable in future litigation, as any documents with relevance to that litigation may have to be disclosed.
Will there be an employee drive to see data around the pay gap?
There’s been a great deal of awareness in the public sector and now awareness in the private sector is growing about the potential for employees to bring equal pay claims. It’s worth remembering that employees can go back for a period of six years – protected from any victimisation – to pursue pay claims.
Claims from employees at large companies, such as Asda, have also raised awareness of the possibility of bringing claims.
Inevitably the publication of gender pay data is going to put the spotlight on equal pay.
What can companies do to avoid triggering liabilities?
Documents created for the purposes of obtaining legal advice attract legal advice privilege, meaning they are not disclosable in litigation – so employers could consider involving in-house or external lawyers when conducting audits.
If employers don’t disclose the data when publication is due, they could be fined £5,000, and possibly be charged with a criminal offence – so it would be wise for employers to prepare for the possibility that they might have to explain their data and any discrepancies.
Employers taking steps to address any issues they have identified should also consider the appropriate employee relations and communications strategy, so they will be in a much better place to explain to their workforce what is happening and why.
Will the historic and systemic issues change now publication is required?
Only time will tell – the gender pay gap is narrowing, but remains persistent across most sectors in the UK, particularly for senior professionals and in traditional skilled occupations.
A focus on the gender pay gap would make employers more likely to address those issues. But time is needed – changing terms and conditions around pay is notoriously difficult.
Employers that do nothing in advance risk discovering when they have to declare their pay gap, that some issues disclosed are not favourable.
So what do they do at that point? Do they decline to publish the data risk a fine and speculation as to the reason behind their non-disclosure, or do they publish and put a spotlight on the data, at which point unhappy employees may take action?
The employer that addresses the issues in advance is much better placed to answer employee concerns.
The time employers have between now and the requirement to publish data is the time they should use to identify and address their issues – and if they can’t do so in the short-term, it’s time to work out a long-term strategy for addressing their gender pay issues.