While there may be certain problematic issues with the gender pay gap reporting regulations, they have been a catalyst that has prompted employers to address workplace pay inequality for women. To assess how effective the regulations have been, the Business, Energy and Industrial Strategy (BEIS) Committee conducted an inquiry and has now made various suggestions for reform.
These recommendations include pro-rating the bonus gap because the prescribed calculations currently make no provision for part-timers or those who join mid-way through the year, clarifying the legal powers of the Equality and Human Rights Commission, which might not actually have the ability to take enforcement action at present, despite what it thinks, and forcing employers to explain their gender pay gap, rather than this being optional.
The biggest proposed change to the regulations, however, is to extend their scope so that employers with over 50 employees should have to report, rather than just employers with more than 250 staff. The motivation for this is that only about 50% of UK employees work for an organisation covered by the regulations. The BEIS Committee believes that extending coverage will mean more organisations working to improve opportunities for women.
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While this is an admirable goal, it brings practical problems. Statistics produced by smaller organisations will be inherently more unreliable, because the gender pay gaps are calculated by working out averages. This means that an average calculated from a small group can be massively affected by the addition or removal of just a few individuals.
Even for a ‘perfect’ organisation of 50 people, with no discrimination issues whatsoever, its gap could fluctuate dramatically from year to year simply because of the laws of chance.
In addition, the time and resources involved in properly complying with gender pay gap reporting are typically greater than the government envisaged, often making it difficult for employers to comply.
The government should think carefully before extending the regulations and forcing smaller organisations to calculate and publish potentially unreliable statistics.
Tom Heys is a legal analyst at Lewis Silkin