Key gender pay gap considerations for 2021

From the impact of the pandemic to legislation updates, Lucy Fordham explains what employers need to look out for when preparing their data

Last year we saw the suspension of mandatory gender pay gap annual reporting for the 2019-20 period because of the Covid pandemic, and yet, as of 1 January 2021, almost 6,000 organisations still chose to submit their figures. No doubt many had already prepared their data internally, and failing to report it could suggest a lack of commitment and a step backwards from gender equality. With the 2020-21 deadline extended until October, here are some key considerations to get you started:

Furlough impact 

From 23 March to 5 April 2020, 27 per cent of the workforce had been furloughed across the UK. Because of this, the gender pay gap data for many organisations is likely to be skewed (the snapshot date being 5 April 2020 for the 2020-21 reporting period). This will make year-on-year comparisons more difficult and will also impact on overall reporting in future years. 

The concept of ‘furlough’ did not exist when the gender pay gap regulations came into force. But the government did update its guidance on 14 December 2020, confirming that furlough has been added to the list of leave types for employees to exclude when assessing “full-pay relevant employees” for the hourly pay calculations – unless their pay was topped up to their usual full pay amount. This means all employees on furlough should be included in employer headcount threshold numbers and bonus pay calculations. 

Because of the impact of furlough, we suggest employers analyse the data with respect to data without furlough staff, data with furlough staff on reduced pay and also data with furlough staff on full pay. This will help them to shape the narrative used to explain any potential shift in the pay gaps. 

Pandemic impact 

The pandemic is also disproportionately affecting women and other minority workers and, with representation being a major driver of pay gaps, fewer women in the workforce could lead to widening pay gaps. To prevent an adverse impact on women in the workplace Business in the Community suggests that all teams should ensure that cost-cutting measures do not disproportionately impact women and promote company policies related to caring responsibilities at this time. 

Employers should also embed remote working into the way jobs are designed in the ‘new normal’ – flexible working is proven to enable the recruitment, retention and progression of women at work. Without these suggestions being considered, repercussions may be seen in the way of negative gender pay gap reporting outcomes.

What’s next for mandatory reporting? 

The next scheduled review of the gender pay gap regulations is set to take place in 2022; however, with the current status of Covid, reviews may be delayed. This will hopefully address some of the concerns or shortfalls of the current regulations. 

The Fawcett Society published a report comparing gender pay gap reporting legislation across 10 countries around the world. The report found that the UK is “unique in its light-touch approach” and there are two key areas where the UK appears to be out of step with other countries. First, the high minimum employee threshold for reporting (250 employees), with the median of these 10 countries being only 50 employees and, second, the fact that there is no requirement to report on policies or action plans.

The other debated issue is when ethnicity pay gap reporting might come into effect. In January 2019, the UK government closed its consultation on ethnicity pay gap reporting and no action has been taken since. Despite this, there has been an increasing number of employers voluntarily reporting this, although the number is still small. 

However, a private members’ bill was submitted on 20 October 2020 to the House of Commons. If the Equal Pay Information and Claims Bill becomes law, it will be mandatory for companies with at least 100 employees to report on both their gender and ethnicity pay gaps. The next stage for the bill is a second reading, which was scheduled to take place in January 2021, but has been delayed with the new proposed date not currently confirmed. 

Pay equity is increasingly becoming a priority on the corporate agenda as firms consider broader environmental, social and governance concerns, and how to redefine their purpose to generate a more positive impact on society and a non-discriminatory working environment. Committing to gender pay gap reporting and planning for ethnicity reporting are part of the way to promote diversity and inclusion in the workplace.

Lucy Fordham is a consultant at Curo Compensation