Government refuses to force SMEs to disclose gender pay gap

18 Jan 2019 By Jonathan Owen

Decision criticised as ‘missed opportunity’ as parliamentary committee’s key recommendations disregarded

Small and medium-sized companies in Britain will remain exempt from rules requiring gender pay gap information to be disclosed, after the government said it would not force firms with at least 50 employees to release details of what men and women are paid.

It has rejected a recommendation from the Business, Energy and Industrial Strategy (BEIS) committee that the current rules – which only apply to companies with 250 staff or more – be extended to those with 50 workers or more.

Widening the net of companies required to report their gender pay gap would have seen some 35,000 additional businesses employing around 3.3 million people fall under the regulations.

Currently only around half (56 per cent) of all employees in the UK work for companies who have to publish gender pay gap data. Of these organisations, more than three-quarters (78 per cent) pay men more than women, with the average gap being 17.9 per cent, according to the figures from first round of reporting in 2018.

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The call for businesses with more than 50 employees to publish annual gender pay gap data was made in a report by the committee into gender pay gap reporting, released last year. It cited evidence that the gap “is greater in these smaller companies” and argued that requiring such firms to collect data will enable them to tackle the issue.

But, in its response to the report, published yesterday, the government disagreed with extending the rules to cover smaller firms and said that "reporting could be particularly burdensome for small and medium-sized businesses”.

The government has also ruled out another key recommendation of the committee, that companies be required to publish action plans and narrative reports on what they are doing to close the gender pay gap.

In its response, it accepted that having an “effective action plan” played a “crucial” part in closing the gender pay gap within organisations, but said making it a “mandatory requirement might result in a prescriptive format with limited value to employers and employees”.

It added that under the current system, employers have “the freedom to produce an action plan that is relevant to their individual situation”.

A recommendation that companies should report the pay of partners was also rejected on the basis that partners are not “paid” but take a share of the profits, “which is not directly comparable with employees’ pay”.

Rachel Reeves, chair of the BEIS committee, said the government’s refusal to extend gender pay gap reporting requirements to partners was disappointing and made “nonsense of efforts to understand the true scale of, and the reasons behind, the gender pay gap in some companies”.

She said: “Failing to accept our report’s recommendation to require businesses to publish an action plan for closing the gap, against which they must report progress each year, suggests the government are timid in holding businesses to account for their efforts in driving the change needed.”

The government’s response appears to be at odds with the opinions of the majority of MPs. More than two-thirds (69 per cent) think that “much more needs to be done” on reporting requirements on gender pay, according to a recent YouGov poll.

Charles Cotton, CIPD senior performance and reward adviser, described the government’s response as a “missed opportunity” to improve the regulations.

He told People Management: “We would have preferred them to require organisations to have a narrative and to have an action plan.”

When it comes to explaining what they are doing to close the gap: “Those organisations which wish to be perceived as ‘good’ by employees, clients and investors will wish to demonstrate this by publishing a narrative and action plan,” he said.

He added reducing the threshold at which companies have to report gender pay gap data should be a long-term aim rather than something that is done overnight.

Cotton predicted the current regulations on gender pay gap reporting are likely to be mirrored in forthcoming proposals on the release of ethnicity pay gap data.

“I think it would make sense that any subsequent requirement to publish ethnicity pay data would mirror the requirements that already exist to produce gender pay data. I think it would be quite complex to have different rules and regulations covering both,” he said.

In its consultation on ethnicity pay, which ended last week, the government said: “Employers of fewer than 250 people should not be expected to publish ethnicity pay data… our judgement is that this risks imposing too great a burden on business. A threshold of over 250 employees would mirror the gender pay gap reporting methodology.”

The government’s response to the consultation is expected in the coming months and employers will not start having to report ethnicity pay data until 2020 at the earliest, according to Cotton.

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