UK gender pay gap reporting – radical change or token gesture?
Other countries leading the way here demonstrate how greater emphasis on action required
New gender pay regulations, due to come into force by April 2017, require UK employers with 250 or more employees to publicly disclose gender pay information on an annual basis. While undoubtedly a positive step forward for equality and diversity in the UK, there are concerns these changes do not go far enough in addressing pay inequality and will leave the UK lagging far behind the rest of Europe.
According to the Office for National Statistics (ONS), the 2015 UK gender pay gap was 19.2% in favour of men. Although a worldwide challenge, the UK appears to be dealing with gender pay disparity less effectively than other nations, as demonstrated by the 2015/2016 Global Talent Competitiveness Index ('the Index') in which the UK ranked just seventy-sixth for its gender earnings gap.
Over the past few years, the UK government’s approach to gender pay gap disclosure has been one of gradual pressure on employers, with a focus on voluntary publication. However, this has had minimal uptake and very little impact on national figures, thereby prompting the new mandatory disclosure requirements.
Under the new regulations, employers will need to disclose (both on their website and a government-sponsored portal) gender pay and bonus gaps, together with details of bonus recipients by gender and male/female employees falling into salary quartiles. However, there is currently no provision for enforcing these requirements, as the regulations do not contain penalties for non-compliance. There is also no requirement on employers to take action to close any pay gaps identified.
Therefore, it is questionable whether this new approach will go far enough in addressing pay inequality and help to narrow the gap between the UK and those European countries with a stronger gender pay record.
By way of comparison, Sweden is performing much better in relation to gender pay, according to the Index, in which it is ranked eighth. Since 2009, Sweden has required companies with just 25 or more employees to carry out a pay survey every three years and produce an equal pay action plan to detect and remedy issues, which must include information on gender pay gaps within grades.
Sweden’s Scandinavian neighbour, Finland, is also driving significant change and is currently ranked 20th in the Index. The Finnish Equality Act requires companies with 30 or more employees to share an equality plan with the workforce every other year which must include a pay survey and report on the gender pay gap within job roles and pay grades.
France also sits some way ahead of the UK in the Index, ranking 24th for its gender earnings gap. French legislation introduced in 2010 requires companies with more than 50 employees to carry out analysis of their gender pay gap and define annual action plans for combatting pay differences. The legislation initially lacked an enforcement mechanism and was slow to take effect, although compliance increased after the introduction of civil penalties in 2012, which allow the French government to fine companies up to 1% of their total wage bill for non-compliance.
Although the new UK regime is a step towards improving pay equality, there appear to be glaring omissions when considered in light of other European approaches. Firstly, the employee threshold for gender pay action is considerably higher in the UK than many other nations, thereby drastically limiting the number of employers which will be caught by the requirement to disclose.
Additionally, the proposed regulations impose no obligation on UK employers to act on and address any gender pay issues identified. This contrasts starkly with those nations with a stronger gender pay record which have a requirement to produce action plans and remedy pay gaps.
Finally, will the absence of a mechanism for enforcement of the UK regulations render them toothless? The French example highlights the importance of ensuring compliance and, without this, there is a real risk that UK employers may choose non-compliance over the disclosure of commercially and reputationally sensitive gender pay information.
It goes without saying that the new requirements are a step towards greater pay accountability by UK employers. However, if we do not take our lead from those European nations paving the way on gender pay, the regulations may ultimately have little effect on gender pay disparity within the UK.
Ed Stacey is partner and head of employment law at PwC