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published on 31 october 2022 | reading time approx. 5 minutes
The gender pay gap refers to the variance in pay that women and men receive for a similar role or the difference in average salaries between genders.
Back in 2017 the UK government introduced new rules on pay gap reporting, which make it obligatory for organisations employing over 250 individuals to publish calculations, with guidance around the data used.
The European Commission has also published a draft directive, expected to become law in 2024, with a new raft of reporting and declaration standards.
A European Commission study called The Gender Pay Gap Situation in the EU explores the gender pay gap throughout the EU. It shows an average difference of 13%, which has not changed significantly in ten years.
Some of the headline statistics are as follows:
In the UK, the picture is only marginally better, considering that gender pay gap reporting has been mandatory for certain organisations for five years. The average pay gap for full-time employees was 7.9% in April 2021, according to the Office for National Statistics (ONS).
While a UK pay gap exists, it has been reducing, with a previous 9% average variance in April 2019 for full-time employees.
Part-time and seasonal workers experience a far larger pay gap, with a UK average of 15.4% in 2021, compared to 17.4% in 2019.
The governmental Gender Pay Gap Reporting requirements came into effect in 2017 and apply to public sector employers and other businesses with 250 or more staff on their 'snapshot' date.
Snapshot dates fall on 30th March for public sector organisations and 5th April for private and voluntary sector businesses. Organisations have 12 months to comply with compulsory reporting requirements if their total employee count exceeds 250 on that date each year.
Reporting must include:
A written statement must accompany submissions, although public sector employers are exempt from this requirement. The statement affirms the accuracy of the data reported and must be published on the organisation's public website.
Many businesses add a narrative to explain how they are analysing and closing the existing gender pay gap, along with an action plan that can be separate from the narrative and sets targets and timeframes.
Pay gap reporting is legally required for British businesses and organisations that fall within the criteria.
Failures to provide a report, or late reports, are liable to enforcement by the Equality and Human Rights Commission.
Potential enforcement action can include fines, court orders or prosecution.
In line with the growing demand for parity within professional workplaces and public awareness of the gender pay gap, the European Commission introduced a draft directive in June 2022, setting out plans for a comparable reporting system.
Companies are advised to begin preparing now for these new compliance measures and to address existing pay variances as a matter of urgency.
The new reporting obligations are expected to become law as soon as 2024, with the draft directive setting out a range of compulsory declarations and potential outcomes:
Gender pay gaps are far from exclusive to the UK and EU, with a 17% average pay gap in the US and 23% as a global average, so further legislation is expected throughout international employment law.
The priority for larger organisations and public sector bodies must be to identify pay inequality - even if contained within specific branches, departments or depots, and address them.
Additionally, they may need to provide detailed assessments to prove that pay gaps are not deliberate or a result of discrimination.
When the new EU directives become mandatory, the contrast is that they will require companies to publish direct comparisons based on work completed. This requirement varies from UK laws, which are based on average pay gap data.
Pay gap data holds legal privilege in the UK and cannot be used as evidence in court, but the EC is taking a different route.
According to the draft directive, employers with 250 staff or more will need to report:
Businesses will also need to apply criteria to examine whether jobs are gender neutral and how training, professional and educational employment requirements are assessed between male and female candidates.
If an EU business has a gender pay gap of 5% or above and cannot justify it, it must undertake a comprehensive pay assessment exercise.
The EC has set clear expectations for rigorous new gender pay gap reporting rules and compliance measures, with possibly only 15 months until the draft legislation becomes mandatory.
With such a tight timescale, EU companies must act swiftly and pre-empt legal claims, public reporting requirements and regulatory action to address pay inequality.
The first step is to evaluate all available data to identify whether a pay gap exists, to what extent, in which areas of the business, and how the proposed new guidelines would come into play.
Step two is to protect the business from reputational, legal and financial risk.
Data extraction can be a significant undertaking, particularly for complex multinationals or organisations with diverse payrolls operating across multiple jurisdictions.
One of the best approaches is to begin collating data from every relevant location and harmonising that information to ensure pay gap assessments are accurate across as many reporting mechanisms or payroll structures as required.
Demonstrating this level of preparation is a key element of pre-emptive action and allows organisations to simulate the anticipated legislation and make informed decisions about where changes are required.
Mariam Suleman
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