Companies cannot avoid reporting on gender pay
What will happen to companies who fail to meet the deadline or whose disclosures are inadequate?
In less than three months’ time the Gender Pay Gap Regulations require that all employers with more than 250 employees should have disclosed their gender pay gaps on their company website and uploaded the information to the government website. However, with only 500 companies providing their disclosures out of the estimated 9,000 employers that are subject to the Regulations, what will happen to those companies who fail to meet the deadline or whose disclosures are inadequate or incorrect?
Tackling the gender pay gap is a key focus for the government and, while the Regulations contain no financial sanctions for failing to comply, the risks of ignoring the reporting obligations could be significant. From a reputational perspective, refusal to report could lead to negative speculation about the company's gender pay profile and may lead to employee relations issues or even equal pay claims if employees think the business has something to hide. In addition, despite the lack of direct financial sanction within the Regulations themselves there is an underlying mechanism that may allow the Equality and Human Rights Commission (EHRC) to pursue non-compliant employers. This could include it taking steps such as investigating the non-compliant employer, issuing an unlawful act notice, or requiring the production of an action plan. While there is debate around the enforceability of the EHRC’s power as currently drafted, it has indicated that it would review the Regulations in the future and would introduce more formal sanctions such as financial penalties if necessary. The EHRC has also recently published a draft policy that outlines its focus on ensuring that employers comply with the Regulations. Its intention is to use informal action in the first instance but to take formal enforcement action where employers do not then comply.
Therefore, while the potential reputational risks are likely to be sufficient to persuade most employers to comply with their reporting obligations, the EHRC is committed to enforcing the Regulations should this become necessary and companies are unlikely to be able to avoid reporting in the long term. Any inadequate disclosures could also be subject to scrutiny although greater focus will be placed on employers who completely fail to report in the first instance.
Assuming that most employers do report, a further question remains as to how helpful the data will actually be. Other countries have already gone much further than the UK and required employers to publish details of the positive action they intend to take, often through the provision of action plans. In the UK the Regulations do not require companies to produce an action plan to be published alongside the gender pay gaps. However, the latest ACAS guidance strongly encourages employers to submit a supporting narrative to explain any gaps identified and an action plan detailing what is being done to remedy them. In this first year of reporting employers may be reluctant to commit to a specific action plan; as for many this will be the first time they have considered their gender pay profile. However, as annual reporting is required it is likely that companies will need to start carrying out remedial action to address their pay gaps going forward and will therefore develop diversity strategies and action plans accordingly. Although they may choose not to publish these action plans, the introduction of mandatory reporting is still likely to encourage companies to constructively address their pay gaps.
Ed Stacey is an employment partner and head of legal at PwC