Gender Pay Gap Reporting: Organisations Granted Six-Month Grace Period

Morgan Lewis
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Morgan Lewis

As businesses continue to grapple with the effects of the pandemic in the spring of 2021, the Equality and Human Rights Commission (EHRC) has granted companies a six-month extension to report their gender pay figures. Employers should aim to report by 4 April 2021 wherever possible, but the EHRC will not take any enforcement action until 5 October 2021 in order to “strike the balance” between supporting businesses and the Regulations (as defined below). The annual April deadline introduced in 2017 was suspended entirely in 2020 due to COVID-19.

HOW EMPLOYERS COMPLY

Employers with more than 250 employees on their “snapshot date” are caught by The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (Regulations). The snapshot date is 5 April 2020 and 31 March 2020 for private and public companies, respectively. The data for the 2020/2021 reporting year must calculate, report, and publish the following pay gap figures:

  • Percentage of men and women in each hourly pay quarter
  • Mean (average) gender pay gap using hourly pay
  • Median gender pay gap using hourly pay
  • Percentage of men and women receiving bonus pay
  • Mean (average) gender pay gap using bonus pay
  • Median gender pay gap using bonus pay

The data must be accompanied by a written statement signed by an “appropriate person” confirming that the published information is accurate. What constitutes an “appropriate person” will differ depending on the type of employer.

Employers are also encouraged to publish a supporting narrative and action plan to help explain their gender pay gap, as well as any changes made since their last report. We summarised the UK government’s guidance to understanding your organisation’s gender pay gap and how to develop an action plan.

FURLOUGHED EMPLOYEES

The Regulations require employers to omit from their calculations any employees who were on reduced rates of pay on the snapshot date. This is likely to affect a significant amount of businesses which have availed themselves of the Coronavirus Job Retention Scheme to face the challenges of the pandemic.

Furloughed employees therefore do not count in the gender pay gap figures that need to be published. An exception to this is if the employer topped up their employees’ furlough payments so they received 100% of their pay. For the purposes of the report, furloughed employees will constitute employees “on leave.”

The absence of the employees that have been placed on furlough could skew the data. Women in different organisations may have “opted” to take furlough due to childcare responsibilities following the closure of schools. Accordingly, some employers are carrying out additional analysis to explain the impact of these issues as part of their narratives, as well as explaining any additional supportive measures provided to working parents aimed at reducing these adverse effects. While there is no obligation on an employer to top up the pay of employees furloughed for childcare reasons, refusing to do so could give rise to potential claim for indirect sex discrimination by working women. There is a potential defence to such a claim although an employer would need to show that it has a legitimate business aim and has acted proportionately in pursuit of that aim.

CONSEQUENCES FOR EMPLOYERS

If employers do not submit their report by 5 October 2021, the EHRC will initiate enforcement action. Companies can expect a letter from the EHRC reminding them of their obligations and requiring them to comply with their reporting duties within 28 days. In the event that the employer does not comply with this initial correspondence, the EHRC has the power to bring forward an investigation. A company will have breached the Regulations if they have committed an “unlawful act.” The EHRC may thereafter issue an “unlawful act notice” which will require the employer to prepare a draft action plan within 14 days, and, if unreceived, apply to court to make an order compelling the employer to produce the plan. A failure to comply with a court order without a reasonable excuse carries an unlimited fine.

CONCLUSION

Businesses should expect a level of scrutiny over their gender pay gap figures. In the two years since employers were required to report, the societal interest and awareness of the gender pay gap has grown immensely. Furthermore, commentators have highlighted the disproportionate effect of the pandemic on the female labour market, underscoring the importance of the Regulations.

Notably, despite the suspended deadline last year, around 50% of companies reported their data in April 2020 for their 2019/2020 year. The benefits of reporting and publishing pay gap figures sooner rather than later will allow employers to tackle any unexpected issues or complications early on, and establish themselves as leaders in their industry, boosting recruitment and retention prospects.

Employers may also run a reputational risk if they fail to report and publish their gender pay gap information. The UK government’s Gender Pay Gap Service publicly highlights the companies that failed to publish their data.

It remains to be seen whether the original 4 April 2021 deadline will enjoy a similar number of organisations voluntarily publishing their figures before the clock starts on the EHRC’s enforcement action from 5 October 2021.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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