Mandatory gender pay gap reporting – just two more years to wait!
Today the government has finally published draft regulations that will require large private sector employers to publish their gender pay gap. It is intending to commence these regulations from 1 October 2016 but companies will have until 30 April 2018 to publish their pay gap.
Government and business have said it is necessary for employers to have time to prepare for implementation. But haven’t businesses already had more than sufficient time to prepare for this initiative? Back in 2010, the Labour government took the power in s.78 of the Equality Act to introduce gender pay gap reporting. At the time it promised not to use the power for three years to see if a voluntary approach could work. Shortly after coming to power, the coalition government set up a voluntary scheme ‘Think, Act, Report’ to actively encourage it. At the start of 2015, after the clear failure of the voluntary approach – at present only 7 employers have published a pay gap – Labour and Lib Dem MPs joined forces to push for s.78 to be introduced by April 2016.
There’s also disappointment that the government is not introducing any civil penalties for businesses that refuse to comply with gender pay gap reporting, something that s.78 gives them power to do. Instead, the government says it will keep the issue of enforcement under review, depending upon “employers’ willingness to comply… during the first few years”.
Those familiar with the Trade Union Bill will be struck by how this gradual approach to implementation contrasts with the 12 weeks unions are being given to comply with new opt-in requirements for political fund ballots. Also, unions may face hefty financial penalties for non-compliance with new reporting requirements under the Bill. Plus, while the government is dedicating £500,000 to helping big business prepare for gender pay gap reporting, unions face the prospect of being charged money by the government to pay for the expansion of the union regulator’s role.
The government has said in its consultation response that it may name and shame employers who don’t comply with gender pay gap reporting. They have said that they want to publish league tables to compare employers’ reported pay gaps once the April 2018 deadline has passed. League tables could help increase pressure on employers to take action to narrow their pay gap, which would be good as just publishing a number won’t necessarily lead to action. But if employers aren’t going to face any penalties for not publishing, many – probably the worst performers – will simply choose to avoid the public scrutiny of a league table and not publish.
Today’s regulations are a step in the right direction though. In particular, it is welcome that the government is setting out a standard method for calculating the gender pay gap so employers can be compared with each other and with the national measure from the Office of National Statistics. It’s also good that employers are being required to publish a separate figure for bonuses – the EHRC found in the finance sector there was a 57% gender bonus gap in that sector, significantly bigger than the pay gap. In addition, businesses will be required to publish where men and women are in the earnings distribution – although this will only be by pay quartile, which may blur some of the starkest gaps in men’s and women’s representation at the very top and bottom of organisations.
In today’s announcement, the government has repeated David Cameron’s desire to close the gender pay gap in a generation. I doubt this measure is going to be the big game-changer to do this. Hopefully, in a few years’ time though, we will get some more businesses paying closer attention to gender equality in their workplaces and taking action to improve women’s pay and progression. But we need to realise the limitations of what this measure can deliver and what else is needed besides.
For example, a focus on gender pay gaps within workplaces will have a limited impact on the wider gender segregation in the labour market and the undervaluation of what’s traditionally seen as “women’s work”. There are areas where women are mostly employed, like cleaning, hospitality or social care, and very few men. These workplaces may have relatively small gender pay gaps to report compared to other parts of the economy but there is nevertheless a problem of entrenched low pay and lack of progression for many of the women who work there compared to elsewhere.
We also need to bear in mind the scale of the task. The national gender pay gap for whole workforce currently stands at just over 19 per cent. The TUC estimates at the current rate of progress it will take nearly 50 years to close it. In the past four years, there has been very little change in the gap between full-time men and full-time women’s earnings, which is where we’d previously seen the greatest progress. And in the public sector, where women have tended to fare better, progress has not just stalled but it has gone into reverse, with a widening pay gap in the past two years. The pay gap for women in their 20s may now be minimal but for women in their 30s and 40s, the years following the transition to motherhood, it is still wide. Women are still experiencing a significant and lasting penalty from working part-time or taking time out of the workplace to accommodate childcare in those early years.