Since 2017, organisations with 250 or more employees have annually been required to publish the details of their gender pay gap on their website and report this data directly to the UK government. On 24 March 2020, a few days before the deadline and citing the onset of the coronavirus, the UK government suspended those requirements. In response, the number of businesses reporting the details of their gender pay gap dropped by half compared with last year.
The reporting requirements
Under the reporting requirements, the gender pay gap within an organisation is the difference in average and median pay between men and women; the difference in average and median bonus payments; the proportion of men and women receiving bonus payments; and the proportion of men and women in each pay quartile.
Ordinarily, when a business fails to comply with its gender pay gap reporting obligations, the UK’s Equality and Human Rights Commission (EHRC) will write to them in the first instance. If the organisation still does not comply, the EHRC will formally investigate it and, if it concludes that the organisation has breached its obligations, may issue an ‘unlawful act notice’.
An unlawful act notice requires the business in question to prepare a draft action plan within 14 days, setting out how it will remedy its continuing breach. The organisation may challenge the EHRC’s decision to issue the unlawful act notice in court, either because it denies that it is in breach or because it views the requirement to prepare an action plan as unreasonable.
Finally, if the company does not comply with its action plan, the EHRC may apply for a court order requiring it to do so. The organisation would then be in breach of a court order if it does not comply.
For most businesses, the greatest cost of non-compliance is not likely to be the measures taken by the EHRC in and of themselves, but rather the reputational damage that the measures cause. The EHRC publishes details of the enforcement action it has taken on its website, naming non-compliant organisations. In 2019, it wrote to 47 companies that failed to report and started investigations into four of them. In previous years there has also been significant media interest in both failures to report and in those reports that have indicated a significant pay gap in a particular organisation.
Employers may well have breathed a sigh of relief at the government’s announcement that the requirements, and any consequent enforcement action, would be suspended. However, those organisations should not assume that the requirements will not be reinstated before next year’s reporting deadlines. This would likely mean that, come March and April next year, they will again be at risk of enforcement action if they do not publish and report their pay gap data. Accordingly, it would be best practice for businesses, particularly those that were struggling to fulfil their pay gap reporting obligations in time this year, to use the reprieve to continue collecting data and, where necessary, to build new and better processes for compliance.
Moreover, many organisations will recognise that there are significant reputational benefits to going beyond mere compliance with the requirements by publishing alongside the pay gap data an action plan for remedying the gap and a recognition of the importance of doing so. This is particularly so where the gap is significant. The current period of suspension provides a good opportunity for companies to develop and implement a robust action plan to ensure that their pay gap data makes for better reading when they are required to publish it again.
With the government’s announcement that the gender pay gap reporting requirements would be suspended coming only days before the deadline for compliance, it is noteworthy that the number of organisations reporting has fallen so sharply – most will likely have had the data ready for publication by that stage. Whatever the reasons for the significant drop, no business should count on being able to withhold publication in the future and, with some reports suggesting that coronavirus may have a greater economic impact on women than men, the next round of pay gap reporting will be more important than ever.
Beth Hale is a partner and David Jones an associate at CM Murray