An update on gender pay gap reporting

Gender pay gap reporting was paused last year because of Covid-19, but the next reports are due very soon. With the effect of the pandemic on women causing concerns that the pay gap has widened, and that reports might be skewed, what does the future of pay gap reporting look like?

What are the current gender pay gap reporting requirements?

The gender pay gap is the difference in average pay between men and women in a workforce. In the UK, private and voluntary sector employers with at least 250 employees need to publish pay gap reports. Mandatory gender pay gap reporting also applies to public sector bodies in England with 250 or more employees; while in Scotland listed public authorities with more than 20 employees are under an obligation to publish certain gender pay gap information.

The requirement to publish reports was paused last year on account of COVID-19. Only half of employers reported their pay gap data in April 2020 compared to the previous year. The regime has now re-started, and by 4 April 2021 (30 March in the public sector) employers must report their gender pay gaps calculated using data from 5 April 2020.

How might the pandemic affect the gender pay gap?

Many surveys and reports have shown that the pandemic has disproportionately affected women in the workforce. This is largely because of two factors: women are more likely than men to work in industries that were shut down; and overall women took on more childcare responsibilities than men.

Studies have shown that:

• 18% of women have reduced their working hours to manage childcare during school closures.
• Mothers were 47% more like to have permanently lost their jobs or resigned as a result of COVID-19.
• Women were one third more likely to work in a sector that was shut down by coronavirus than men: one in six (17%) female employees were in such sectors, compared to one in seven (13%) male employees.

The Fawcett society is concerned that the effect of the pandemic on women may impact the progress of gender equality in the workplace for years to come. For example, reducing hours at work because of childcare could lead to a lower likelihood of promotions down the line. In addition, due to disruption caused by the pandemic businesses may have delayed initiatives to reduce gender inequality in the workplace. Under the current reporting scheme, businesses are not required to publish how they plan to address any pay gaps.

How will gender pay gap reporting be affected?

The hourly gender pay gap is calculated using data from full pay relevant employees. Employees who were on furlough or receiving statutory sick pay on the snapshot date of 5 April 2020 cannot, therefore, be included when calculating the mean and median hourly pay gap, and the proportions of employees in each quartile, unless their salary was topped up by their employer. They will, however, count for headcount and bonus calculations.

Pay gaps could appear significantly skewed because of this. There are concerns that pay gaps for some may appear smaller than they actually are, for example in the retail or hospitality sector, where many lower-paid women have been furloughed. Equally, in other circumstances, the imbalance may appear to be getting worse. In either case, if the data from April 2020 is not properly representative, this should be explained in the narrative of the report.

The future of pay gap reporting

In October 2020, a Private Member's Bill was introduced which proposed reducing the threshold for pay gap reporting from 250 to 100 employees; introducing ethnicity pay gap reporting for employers with 100 or more employees; and requiring employers to publish a plan to address any pay gaps that are identified. Although the Bill has cross-party backing, at the moment it lacks government support. That said the government has:

• committed to review gender pay gap reporting in 2022, five years after the current gender pay gap reporting scheme was introduced; and
• consulted on introducing mandatory ethnicity pay gap reporting, with Parliament now set to debate the issue.

Therefore, even if the Bill does not become law, elements of it may be incorporated in future reform.

If you would like more information, please get in touch with a member of the employment and immigration team.

Users of Workbox, our online HR portal, will find guidance and FAQs on the dedicated page on gender pay gap reporting. If you would like to arrange an online demo or free trial to see how your business could benefit from Workbox, please get in touch.