Gender pay gap reporting extends ‘employee’ definition to contractors



‘Snapshot’ date also changed in finalised regulations that take effect in April; experts warn gathering data will be ‘big challenge’ for HR in 2017

The government has published its final gender pay gap reporting regulations, which will take effect on 6 April 2017, confirming many requirements from the draft versions but also introducing a number of changes to the expected requirements.

One of the key changes is to the regulations’ definition of ‘employee’; it was previously unclear, but has been clarified to mirror the definition in the Equality Act 2010. Law firm Lewis Silkin said this change was “significant” because “it covers many self-employed workers who are engaged directly by employers as consultants, independent contractors and so on”.

As a result, many more employers are “likely to come within scope as these workers will count towards the 250-employee threshold”, the law firm added. This could make gathering pay data more difficult for employers because these individuals would not ordinarily be included in payroll. However, the regulations state that self-employed workers are exempt where it is not reasonably practicable to obtain this data.

The ‘snapshot’ date from which employers are to collect pay data has also been changed, from 30 April to 5 April.

Although this will not make a difference for employees who are paid monthly, this will affectemployers who pay workers weekly or fortnightly – particularly if annual bonuses are paid at the start of April, as they may fall within the snapshot date.

The process for calculating hourly pay rates has changed, with the regulations specifying that amonth and a year are to be treated as having a specific number of days.

There’s also clarification that the definition of ‘pay quartiles’ requires organisations to split their workforces into four equal-sized groups organised according to the hourly pay rate, from the lowest to the highest paid.

Only ‘full pay’ relevant employees should be included in calculating mean and median hourly pay rates, according to the finalised regulations. This follows concerns that pay statistics could appear altered by employees who received a lower rate of pay during the snapshot period, particularly women on maternity leave.

Some experts were skeptical that the regulations hadn’t gone far enough to explain what is required from employers. Clare Gregory, a partner in DLA Piper’s employment law practice, said: “The bottom line is that employers are likely to still be left scratching their heads in their quest to identify how to calculate the difference between both the mean and median rates of pay for male and female employees, the difference between the mean and median bonus pay and the proportions of male and female employees who have been paid bonus pay.”

Alastair Woods, a partner in PwC’s reward practice, said that employers – and HR teams – will face difficulties in interpreting which employees and what elements of pay are to be included in their calculations. He said: “Gathering the data for this will be a big challenge for many companies as it is not all in the same place. Employers should be considering these as soon as possible to ensure that they accurately capture their true gender pay position.”

Employers should have already identified their headline numbers and “tested that their data is correct”, added Woods. “It is important for organisations to analyse the data by grade, location and function to spot where issues are arising and the root causes, but realistically we know that this may not possible given other commitments in HR.  This should now be high up the agenda in the new year.”

Suzanne Horne, partner and employment lawyer at Paul Hastings, said the government hadn’t done enough to address employers’ concerns about making gender pay gap reporting representative of broader reward schemes. “While the government has tried to address a number of the obvious criticisms of the draft regulations, the approach remains fundamentally flawed as an over-simplification of a complex issue. They fail to take adequate account of a number of variables and additional factors.”

“As a result, businesses will be forced to publish their gender pay gap without additional details, reasoning, justification or consideration of additional employee benefits, wider compensation packages, experience and expertise.”

The regulations currently only require private sector companies in England, Wales and Scotland with 250 or more employees to publish gender pay gap and bonus data, as well as reveal the difference between employees’ median and mean bonus pay, as part of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. Provisions for public sector organisations are yet to be published.


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