The Business, Energy and Industrial Strategy Committee has recommended that the qualifying threshold for gender pay gap reporting be widened from organisations with 250 or more employees to include businesses with 50 or more staff, in time for April 2020’s reporting deadline.
The recommendation forms part of the committee’s Gender pay gap reporting paper, published today (Thursday 2 August 2018), which also proposes that organisations should be required to publish an explanation of any observed gender pay gap, as well as an action plan for closing it and their annual progress, as part of the standard reporting requirements.
The committee further suggests that the gender pay gap reporting requirements be amended to incorporate partner pay into calculations, and that the government should provide more clarity and guidance in this area, in time for the 2019 deadline.
Crowley Woodford, employment partner at international law firm Ashurst, warned: “Extension of the current gender pay disclosure obligations to employers of this size will present a considerable challenge for them. The larger employers have already found the regime difficult, complex and unclear even with their ability to access internal and external help to understand it. Smaller employers are likely to try and work it out for themselves and therefore the accuracy of any disclosure may be compromised.”
Other proposed changes to the reporting requirements include changing the way that bonus pay is calculated so that it is worked out on a pro-rata basis, and requiring both part-time and full-time gender pay gap statistics to be published. Furthermore, the report asks that the government clarify legal uncertainty around the Equality and Human Rights Commission’s (ECHR) enforcement powers by introducing specific fines for non-compliance.
To help tackle the gender pay gap moving forwards, the committee suggests that sector representative bodies should work with their members and stakeholders to develop and publicise long-term targets, organisation boards should introduce key performance indicators for reducing and eliminating gaps, and remuneration committees should explain how reducing the gender pay gap is being reflected in their decisions.
Claire McCartney, diversity and inclusion adviser at the Chartered Institute for Personnel and Development (CIPD), said: “Efforts to close the gender pay gap should be knitted into the fabric of the organisation at every level, so we also support the suggestion of making those at the top more accountable, such as through stretching targets for [chief executive officers] and senior leaders.
“If organisations are serious about closing their gender pay gaps, it’s only right that those at senior levels should be held accountable and play a more significant role in the efforts.”
The report also recommends that the government publish and maintain a definitive list of all organisations that fall within the scope of the gender pay gap reporting requirements, and consult upon introducing requirements to collect and report pay gap data regarding disability and ethnicity, potentially introducing this for April 2020.
Rachel Reeves, member of Parliament and chair of the Business, Energy and Industrial Strategy Committee, said: “Transparency on gender pay can only be the first step. The gender pay gap must be closed, not only in the interests of fairness and promoting diversity at the highest levels of our business community, but also to improve the country’s economic performance and end a monstrous injustice.
“A persistent gender pay gap shows that [organisations] are failing to harness fully the talents of half the population. The penalties of working part-time, both financial and in terms of career progression, are a major cause. [Employers] need to take a lead. For example, why aren’t they offering flexible working at senior levels? They must look at why they have a pay gap, and then determine the right initiatives, policies and practices to close it. Chief executives should have stretching targets in their key performance indicators and be held to account for any failure to deliver.”
Kate Smith, head of pensions at Aegon, added: “Gender pay equality continues to be a big talking point, but we can’t ignore the growing pension inequality which also exists today. Pension contributions are often calculated as a percentage of earnings, such as auto-enrolment contributions. So, if women’s [salaries are] lower, pension contributions will also be lower leading ultimately to lower retirement incomes. Tackling the gender pay gap will kill two birds with one stone and fix the gender pension gap.”