Reclassifying SME reporting requirements risks ‘turning back the clock’ for women, unions say

Reforms package to ‘cut red tape’ for thousands of businesses could be detrimental to equality if mandatory gender and executive pay are included

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The decision by the government to release thousands of UK companies from a string of reporting requirements by reclassifying them as small businesses has led to criticism from unions.

Prime minister Liz Truss announced on Sunday (2 October) that, as part of a reforms package to “cut red tape” for businesses, organisations with fewer than 500 employees will be recategorised as small businesses, which, although yet to be clarified by the government, unions believe could make them exempt from mandatory gender pay gap reporting.

Truss announced the new threshold would come into play from yesterday (3 October), in a statement that confirmed “thousands of the UK’s fastest-growing businesses will be released from reporting requirements and other regulations in the future, as part of plans aimed at boosting productivity and supercharging growth”. 

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However, while the government reassured that “exemption will be applied in a proportionate way to ensure workers’ rights and other standards will be protected”, unions have spoken out about their concerns regarding the potential effects on equality if these changes were applicable to gender and executive pay reporting.

The Trades Union Congress (TUC) voiced concerns about the potential impact on working women and pay parity. Its general secretary, Frances O’Grady, said: "Make no mistake, these changes represent real threats to workers,” adding that “obligations on businesses that were put in place to help improve the lives of working people, like reporting on gender pay gaps and executive pay ratios, are set to disappear overnight”.

O’Grady warned that “scrapping gender pay gap reporting for businesses up and down the country risks turning the clock back for women at work. And ditching reporting on pay ratios for these businesses will be a boon to greedy bosses.”

Under the previous regulations, only businesses with fewer than 250 employees were exempt from gender and executive pay ratio reporting, which the government recently called “expensive and burdensome for all but the largest firms”.

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Meanwhile, Kate Palmer, HR advice and consultancy director at Peninsula, reminded organisations that the law on equality and the system in place to enforce fairness was not being removed. “Removing the legal requirement for some businesses to file official reports does not necessarily need to mean that all of those businesses will stop doing it,” she said, adding that “businesses will need to ask themselves whether they simply saw the reporting requirement as a paper exercise to tick a box or as an essential tool in helping them make sure gender plays no part in pay decisions, directly or indirectly”.

For this reason, Palmer expressed her hopes that “the benefits of the analysis, both in terms of assessing organisational risk and for the furtherance of equality as a whole, have been seen by those businesses and they will continue to voluntarily report, or simply continue the exercise and publish in house”.

Since 2017, companies in the UK with 250 or more employees have been required to publish gender pay gap reports with information on gender pay and bonus gaps.

According to a recent report – Bridging the gap? – by the Thomson Reuters Foundation and the Fawcett Society, the gender pay gap in the UK grows steadily in the years after parents have their first child, culminating in a gender pay gap of 30 per cent by the time the child turns 13. Indeed, the time spent out of work equates to missed opportunities to progress at work, and therefore less chance for women to increase their pay grade.