Legal

Gender pay gap reporting: getting the message right

17 Jan 2018 By Sarah Ozanne

Employers striving to provide flexible working arrangements for female employees can help ward off unfair publicity with a supporting narrative. Sarah Ozanne reports

As all large employers with 250 or more employees should know, they are under a duty to report on their gender pay gap data. Affected employers were required to capture their first set of data on 5 April 2017, and will need to analyse and publish a report of their gender pay gap data within 12 months of that date. 

Reporting will need to incorporate data on the difference between men and women’s mean and median salaries and bonuses, as well as the number of women and men in their company in each pay quartile of the overall staff population. The report will be accompanied by or incorporate a written statement, signed by an appropriate senior individual confirming that the published gender pay gap information is accurate.

Recent coverage of this requirement has highlighted the potential negative impact on family-friendly policies of gender pay gap reporting. The argument is that the greater uptake of salary sacrifice arrangements by women, the higher proportion of women in part-time positions and the lower bonus awards made to some women employees skew the figures negatively – thereby penalising employers that are trying to provide flexible working arrangements for their employees. The perceived incentive, therefore, is for employers to cease or amend such arrangements.

It is generally acknowledged that excluding pay surrendered under a salary sacrifice arrangement, and not including the value of benefits in data calculations, means the gender pay gap report will not accurately reflect the financial position of employees in a workplace. The government has explained that part of the reason for not adjusting the calculations to take account of these elements of an employee’s pay and benefits is that it would make the analysis and calculations too complicated for employers. 

An important tool

However, although employers are constrained in the way they carry out their calculations, they have the option to explain their gender pay gap figures by publishing a supporting narrative. 

The publishing of such a statement is not a legal requirement but it is an important tool for an employer to put their gender pay gap figures in context, and potentially mitigate the risk of damage to reputation, and employee attraction and retention. 

The narrative can be used to explain whether the impact of particular factors in their sector, workforce population or the use of family friendly policies has caused their figures to misrepresent the real status of pay within their organisation. It also enables businesses to explain how gender pay and bonus pay gaps are calculated, outline the main causes of pay gaps, set out the steps they are taking to improve gender diversity and highlight progress within their organisation. 

Employers can also undertake additional calculations and analysis to give a clearer picture of female pay and progression in their company, and include these with further explanation in the narrative. As with the gender pay gap figures, narratives can then be published each year to explain the data and describe the progress organisations have made in tackling any gap.

Despite its usefulness, employers should take care with the contents of their narratives so that they do not draw attention to issues that could result in claims of equal pay or discrimination. For example, breaking the gender pay gap figures down into job role or job description could highlight discrepancies in pay – and imply an equal pay issue. Therefore, while the potential use of a narrative should not be overlooked or underestimated, employers that do produce one should make sure that its contents are crafted with care. 

Sarah Ozanne is an employment lawyer with CMS

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