Gender pay gap reporting is a requirement set out by the Government Equalities Office. It applies to public authority, private and voluntary employers in the UK with over 250 employees. From 2017 onwards, employers have been required to calculate gender pay gaps for the previous payroll year.
Calculations for pay is based on employee payroll data on the average earnings of men and women in their workforce between certain specified dates. Average earnings differ from equal pay, which means men and women must be paid the same as each other for equal or similar work.
Public authorities and private and voluntary organisations have different reporting dates for gender pay gap reporting:
- Most public authorities are required to report on their workforces’ salaries between 1st April and 31st of March each year. They are then required to submit their report by 30th March the following year.
- Private, voluntary and public authorities not included in the first reporting cohort, are required to report on their workforces’ salaries between 6th April and 5th April each year. They are then required to submit their report by 4th April the following year.
Employers with a headcount of over 250 employees must submit specific data relating to gender pay gap to the Government using the Gender Pay Gap Service. They must also publish the information on their own public-facing website. The information must be published in a prominent position on their site. Employers have the option to provide supporting narrative information as well as an action plan to address inequalities in pay between men and women in their workforce, if a gap has been identified. The Equality and Human Rights Commission can enforce any failure to comply with the regulations with legal action.
It's not mandatory for companies with fewer than 250 employees to report on gender pay gap, but smaller firms are encouraged to do so as it demonstrates their commitment to reducing the gap and promoting equality, as well as commitment to transparency within their organisations. Smaller companies that do submit employee wage data are featured on the Government’s gender pay gap portal. They receive a digital ‘badge’ to demonstrate that their submission was made on a voluntary basis.
Why do companies have to report on their gender pay gap?
Companies have to report on their gender pay gap as it helps employers and Government bodies understand the reasons for pay gaps, as well as the size and the causes of their pay gaps, if applicable. It helps businesses to identify issues that need to be addressed across their organisations.
Having a gender pay gap does not necessarily mean than an employer is guilty of discrimination. It may identify that women are in lower paid, less skilled positions than men in their organisation. The reasons need to be analysed, understood and addressed if found to be discriminatory. By reporting and identifying the causes of a pay gap, employers can then develop an action plan to address the imbalance, offering training and support to enable career development for women.
What gender pay gap information needs to be reported.
Employers need to publish the following six calculations:
- mean gender pay gap in hourly pay
- median gender pay gap in hourly pay
- mean bonus gender pay gap
- median bonus gender pay gap
- proportion of males and females receiving a bonus payment
- proportion of males and females in each pay quartile
The mean calculation is the average rate of pay. This is calculated by totalling the hourly pay rate then dividing it by the number of employees, across both males and female employees.
The median calculation is the middle hourly rate of pay, across males and females, when rates have been arranged from highest to lowest.
What happens if a company does not publish the data?
The Equality and Human Rights Commission (EHRC) has the power to take enforcement action, under the Equalities Act 2006, against companies who do comply with their mandatory reporting requirements. Failure to submit the report by the deadline will result in an investigation by EHRC to see if the company is breaching regulations. If found to be in breach, the EHRC will seek a court order requiring the company to remedy the breach. Failure to comply with the court order will result in a conviction. A conviction can result in an unlimited fine. The EHRC will publish the details of any companies that it investigates for potential breaches on their website. This can lead to significant reputational damage.
How big is the gender pay gap?
The Office for National Statistics ('ONS') publishes a report annually, when all data has been submitted. The 2020 and 2021 reports include data for employees furloughed because of the Covid 19 pandemic.
The ONS report states that 2020 and 2021 estimates are subject to more uncertainty than usual because of employees being furloughed, difficulties in collecting data and the fall in response rates from employers. At the time of writing, results for 2021 are still classed as provisional.
2021 report findings (provisional):
- In April 2021, the gender pay gap for full time employees (over 30 hours per week, or 25 hours per week for educators) was 7.9%. In 2020, the gender pay gap was 7% and in 2019 the gender pay gap was 9.0%.
- Across all employees (full time and part time) in 2021, the gender pay gap was 15.4%.
- High earners experience a much larger gender paygap.
- The gender pay gap is higher in every English region than it is across Wales, Scotland or Northern Ireland.
- Historically, there has been a large difference in gender pay gap between over 40s and under 40s. This trend has continued in the provisional 2021 findings.
- The managers, directors and senior personnel group has seen the biggest reduction in gender pay gap, particularly for the over 50s.
The gender pay gap over the last decade
The ONS reports that the gender pay gap has been declining slowly over time. This has reduced by nearly a quarter over the last decade.
- In 1997, full time employees’ gender pay gap was 17.4%, in 2021 it was 7.9%
- In 1997, part time employees’ gender pay gap was 0.6%, in 2021 it was -2.7%
- In 1997, all employees’ gender pay gap was 27.5%, in 2021 it was 15.4%
How does reporting on gender pay gap help employers and employees?
Reporting on the gender pay gap and publishing the findings means that there has been a continual downward trend over the last decade of pay gaps between genders. Identifying that there is a gender pay gap is the first step to addressing the issue and bringing about equal pay between the sexes. Not only is equal pay a legal requirement under the Equality Act 2010, but there are wider reaching benefits for both employees and employers.
By reducing the gender pay gap and increasing women’s pay, the risk of poverty for females in later life is reduced. An increase in hourly rates will mean that women can make higher pension contributions - as there's a significant gender pension gap as well as a pay gap - with matched employer contributions through auto enrolment, to make better provision for retirement. Reducing the gender pay gap may also increase motivation and productivity of women in the workforce.
Employers working hard to address gender pay gaps fare better reputationally than those with large gaps. Companies have corporate responsibility and are increasingly being brought to account for their actions in the more transparent and litigious society. Not only is there a potential reputational impact for employers with a gender pay gap, but there's also a potential impact on productivity, motivation and financial wellbeing of employees which has longer term and far-reaching negative effects on business.
Payroll systems that reward the workforce equally have a much more positive impact on business. Not only does equal pay send a positive message about a company’s commitment to its workforce, but it helps a business attract and retain better employees. In turn, this will lead to higher productivity, reduced levels of absenteeism and increased profitability.
How to reduce the gender pay gap
Create transparency around pay, promotions and bonuses: One of the most important things you can do is to create a transparent process for promotions, pay rises and bonuses. This helps to show that all employees have equal opportunities across the company. With this in mind, it’s also essential that you create a structured and strictly skill-based interview process as well as a clear selection criteria for recruitment/promotions. Having a formal process in place can help to reduce the impact of individual unconscious biases that may affect decisions. You’ll also want to make it clear how salary increase or pay rise calculations are made so there isn’t any ambiguity.
Show employees how you're addressing the gender pay gap: To build on the point of transparency. If you do find a pay gap exists within the organisation, you may want to address this head on. Rumours and gossip can spread quickly in the workplace, so by creating a culture of radical transparency, employees will feel they are being taken seriously. This might involve publishing a copy of your gender pay gap report, along with a clear action plan of what the company is doing to bridge the gap.
Introduce flexible working policies across the company: Whilst there has been a lot of development in terms of equality around paternal/maternal responsibilities. Some women may still require additional flexibility to work around family commitments. Unfortunately, this can sometimes result in them having to take unpaid leave or work part time hours in order to fulfill those commitments. By offering flexible working policies, you can reduce the need of female employees having to change their hours or sacrifice their pay. You’ll also want to make sure these changes apply to your interview process in order to widen the talent pool and ensure diversity amongst the team.
Increase paternal leave: Another action you can take is increasing paternal leave. This can help to balance childcare responsibilities between men and women, thus helping to further bridge the gap.
How to accurately track your gender pay gap: Obviously none of this can happen unless you have clear visibility over where gaps may exist. With PayCaptain's innovative HMRC-recognised payroll software, employers can quickly produce detailed payroll reports including gender pay gap reports and gender pay gap analytics. This will allow the creation of internal transparency but also quickly pinpoint and address such issues.
How does PayCaptain help?
HR and Payroll teams benefit by using PayCaptain as the solution has a suite of reports to help professionals get the information they need for annual reporting. The PayCaptain solution has a report builder which allows for new reports and analytics to be generated quickly and easily, without the need for specialist skills. These statistics can be provided to meet legislative requirements.
If you’d like to know more about how PayCaptain can help your business, please get in touch. We’d be delighted to run through the functionality and demo the PayCaptain solution for you.
PayCaptain's gender pay gap reports
PayCaptain isn't required to submit gender pay gap information as we have less than 250 employees, however has chosen to do this voluntarily. Click here to view our reports on Gov.uk Overall PayCaptain operates with no gender pay gap. Employees are paid according to their responsibilities and experience.
*The bonus pay gap is skewed because one male employee has remuneration including a commission.
