Overview of provisions
New obligations to report on gender pay gaps will apply to large employers through new Regulations to be implemented by October 2016. The reporting will apply to any legal entity with 250 or more employees and is intended to bring to light imbalances in pay between men and women.
For professional partnerships and LLPs particular issues arise:
- the potential for the reporting to include some or all of a firm’s partners;
- the gender profile in many professional sectors and the scrutiny which the reported figures may attract; and
- the inclusion of profit sharing in the reporting requirements (categorised as ‘bonuses’ in the current draft regulations, which must be reported on separately in the report).
- the Regulations are to be implemented on 1 October 2016
- a firm’s first report will relate to bonuses (including profit share) paid in the 12 months from 30 April 2016 and pay data as at April 2017
- the first report will be due by 30 April 2018 and thereafter annually.
Who is in scope to report on?
Reporting will have to include the pay and bonuses of employees (including salaried partners) and, it has been indicated, those LLP Members who are recognised in law as workers, which is likely to include many, if not all, members of a typical professional services LLP. It will also include self-employed consultants.
Only employers who at the reference date (30th April) have 250 or more UK employees, who ordinarily work in Great Britain under a UK contract, must report. This will exclude many partnerships set up outside the UK with employees here, unless the UK business has more than 250 people working for it in the UK.
Each legal entity must report separately on their employees. It may be that group reporting will be permitted. At present, there is no indication that groups will be required to aggregate their employees when assessing if they have passed the 250 employee threshold.
What has to be reported on?
- The mean hourly gender pay gap between all men and women
- The median hourly gender pay gap between all men and women
- The mean gender bonus gap between men and women
- The % of men and women participating in the bonus
- The distribution between men and women in salary quartiles.
Pay and bonus
Payincludes basic pay, holiday pay, premia (such as London allowances), maternity pay and any bonuses paid in the pay period which includes 30 April. Any bonus paid in the April pay period must be included in the hourly pay calculation (items 1 & 2 above). By contrast, benefits in kind, redundancy pay and expenses are excluded.
Reporting on the pay quartiles – salary bands
The 5th item requires a firm to identify men and women in four pay quartiles. However, the pay range is not required and the 4 bands can be identified simply as Band A, B ,C and D. It is anticipated that many reports will show there to be a higher number of women in support and administration roles and thus the lower pay bands, and more men in the higher bands, partners and senior management.
Bonus pay gaps and profit shares
Profit share is included in the definition of bonus pay, which fails to recognise that monthly drawings on account of profits (outside the April pay period) are often more akin to ordinary pay.
For the separate bonus reporting figures (items 3 &4 above) all bonuses paid in the 12 months prior to the 30th April reporting period must be included in the calculations.
Only those in receipt of a bonus in the 12 months prior to the reporting date have to be included. Given the first reporting date is by 30 April 2018, bonuses paid to staff in the period between 1 May 2016 and 30 April 2017 will be reportable.
In partnerships with a year-end of 30th April, the amount of any profit share will not be known until the accounts are finalised and paid in the following financial year. The Regulations require the bonus or profit share to be calculated and reported by reference to the date of payment, in other words, the financial year in which it was paid (not earned). This may complicate matters for firms which distribute profits irregularly.
Where will this have to be published?
This data will have to be on the employer’s UK website – accessible to its own workforce and the public. It must also be certified as true by a partner or designated member in an LLP.
The Government will maintain a website on which the information will have to be uploaded although no details have as yet been provided.
Fox Williams is monitoring the legislation closely and in discussion with a number of business bodies and clients, advising on the implications of this new law.
This publication is intended as a general overview for information only. It is not intended to be and should not be used as a substitute for taking legal advice. Fox Williams will accept no responsibility for any actions taken or not taken in reliance on this publication.
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