Employers could face ‘unlimited’ fines for failing to report gender pay gaps

19 Dec 2017 By Emily Burt

Businesses warned they must be ready to justify data to staff and customers, as reporting deadline looms

The Equality and Human Rights Commision (EHRC) will use sanctions against companies that fail to report their gender pay data and may issue ‘unlimited’ fines, it confirmed as it launched its new enforcement strategy today (19 December).

The commission used a new consultation to set out a range of powers to investigate suspected breaches of gender pay reporting regulations by private and voluntary sector employers.

While the equalities watchdog said the first step would be to engage informally with employers that breached reporting regulations, EHRC chief executive Rebecca Hilsenrath said it would not hesitate to take legal steps against organisations that failed to cooperate.

“Employers must be transparent about pay for women, and our regulatory role is to make sure this happens,” she said. “We will educate employers about their responsibilities and hope to see widespread compliance. If that doesn’t happen, we won’t hesitate to resort to our more stringent legal powers.”

Employers will have the chance to enter into a formal agreement to comply, as an alternative to continuing with the investigation, which can be enforced if not complied with. The commission may issue unlawful act notices against employers that do not accept the offer of an agreement and that are found to have breached the regulations as a result of the investigation.

Those notices will require employers to comply with an action plan that can be enforced through court orders. The watchdog may also seek summary convictions and issue an unlimited fine to those that refuse to comply with a court order.

From April 2017, all companies with more than 250 employees have been required by law to report on their gender pay gaps, detailing the difference in average pay between all men and women in a workforce. The deadline for companies to publish their gender pay data is 4 April 2018, with public sector organisations reporting by 30 March 2018. Of the 9,000 employers eligible for mandatory gender pay reporting, only around 400 have released their data so far.

Whitehall departments this week issued their own gender pay reports, with the average gender pay gap across the civil service standing at 12.7 per cent.

The Ministry of Justice noted a median gender pay gap of 10.6 per cent in favour of male staff. The Department for Business, Energy and Industrial Strategy (BEIS) revealed its own report yesterday, with a median pay gap of 12 per cent in favour of men.

Some departments have more significant gaps – including the Department for Transport, which reported a 16.9 per cent gender pay gap.

The reporting regime is expected to ramp up sharply in the new year. “It may be that many of these organisations have their data in hand, and are simply planning to report later in the financial year,” said Charles Cotton, senior performance and reward manager at the CIPD.

“Larger organisations could be taking a while to process multiple payrolls, and sophisticated reward approaches such as bonuses and company cars that must be factored in – however, most organisations should have the technology and software to support this, so should not have taken more than a few months to gather the necessary data.

“The biggest challenge for many organisations will be reporting on their gender pay data, not necessarily to the government, but to their own employees and people looking to join the organisation, the company board, investors and customers.

“For employers, this means considering the risks and opportunities of reporting in certain ways, the potential impact on your customer and employer brand, and what it could mean for your organisation. In the CIPD guide on gender pay reporting, we remind employers that this is their story, and their data, and it’s up to them to own that, and discuss the steps they will take in the future to reduce the gap.”  

In the CIPD’s latest reward management survey more than two-thirds (68 per cent) of employers said they were transparent about how pay levels and increases were set, and two-thirds (70 per cent) felt gender pay gap reporting would help to reduce the gender pay gap. A further 30 per cent believed it would have ‘no impact’.

A transparency and accountability webpage launched by the government last week will list all published public sector pay data, including gender pay reports, in a move designed to improve the transparency of public bodies.

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