WHITE PAPER. Gender Pay Gap & Equal Pay:What s The Difference? Gender Pay Gap & Equal Pay Reporting What s The Difference? 1

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1 WHITE PAPER Gender Pay Gap & Equal Pay:What s The Difference? Gender Pay Gap & Equal Pay Reporting What s The Difference? 1

2 The Gender Pay Gap has dominated the news headlines in recent weeks as the April 4th reporting deadline fast approaches. It s clear that many businesses with 250 employees or more, which are legally expected to report their gap, are struggling. A recent report found that as many as 10% of companies don t expect to meet the deadline. There is also a tide of misconception running through the current media storm around the relationship between equal pay, on one hand, and the requirement of gender pay on the other. In this article we will explore 6 key areas where the two differ to help ensure your business is meeting the current legislation, as well as setting the correct pay and benefits to recruit and retain the best staff. In a nutshell the key differences are: legislation, who is in scope, purpose, individual v collective, employers duties and enforcement. Legislation The right of employees and other workers to equal pay originated with the Equal Pay Act This legislation was subsumed (in October 2010) into the Equality Act 2010, which, like its predecessor, requires employers to ensure that they provide equality of pay and other contractual terms of employment as between male and female employees (including the terms of membership of occupational pension schemes and the benefits available to members under such schemes). The legislation operates by effectively inserting an equality clause into each worker s contract. The Regulations were brought into force in April 2017 and require organisations that are in scope to publish the required information within 12 months of the snapshot date each year. The snapshot date for public sector organisations is 31 March. For organisations in the private and voluntary sectors, the snapshot date is 4 April each year. The first reports are therefore due no later than 31 March 2018 and 4 April 2018 respectively. All employers, regardless of their size or industry sector, are required to comply with the Equality Act 2010 and the equal pay provisions contained in that Act. There are no exceptions other than some specific limited provisions applicable to the armed forces. The equal pay provisions apply to all workers, including people such as casual staff and contractors who are not on the employer s payroll but who provide their services personally to the employer. This includes to both full-time and part-time staff and to both permanent and temporary employees. The obligation to publish information about the gender pay gap applies only to organisations that have 250 or more relevant employees. The term relevant employees is defined as including not only direct employees of the organisation but also anyone else who is employed by the employer on the relevant snapshot date (see above). As is the case in respect of the equal pay legislation, this includes workers such as casual staff and contractors who provide their services personally to the employer. The pay information that employers must report has to be based on full-pay relevant employees. This means that employees who, as at the relevant date, are on leave and are consequently being paid at a reduced rate or are not being paid at all can be excluded. Examples include those on maternity leave who are receiving only statutory maternity pay or no pay and employees on sick leave who are being paid only statutory sick pay or whose sick pay has expired. The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, on the other hand, require large organisations to publish information, on an annual basis, about the average overall pay and median overall pay of their male and female employees. Gender Pay Gap & Equal Pay Reporting What s The Difference? 2

3 Purpose The broad purpose of the equal pay provisions of the Equality Act 2010 is to require equality of treatment in employment as between men and women in respect of pay and other contractual terms. The stated aim of the gender pay gap reporting legislation is to introduce greater levels of pay transparency. Individual v Collective The equal pay provisions of the Equality Act 2010 give each individual the right not to suffer sex discrimination in employment in respect of pay and other contractual terms. An employee can compare his/her pay with a colleague of the opposite sex who is doing the same work or equal work. The gender pay gap reporting provisions on the other hand create a duty for large employers to publish information about the average and median rates of pay of male and female employees. There is no obligation to publish the salaries or terms/conditions of any individual employees, nor to state job titles or grades. Employers Duties Equal Pay Under the Equality Act 2010, employers must ensure that female employees are treated no less favourably than male employees in the same employment as regards their pay and contractual terms whenever they are engaged on like work, work rated as equivalent or work of equal value. Like work is essentially work of the same or broadly similar nature. Work rated as equivalent concerns jobs that have been rated as equivalent under a valid job evaluation study. Work can be regarded as being of equal value to another job if it involves broadly equivalent levels of demand, eg skill, effort and decision making. This can be the case even where the two jobs and the types of skills required to perform them are completely different. To be in the same employment, the claimant and his or her comparator must be or have been employed: by the same employer (or an associated employer), and at the same establishment or alternatively at different establishments where common terms and conditions of employment are applicable. Alternatively, under EU law, the comparator may be someone who works for a different employer in circumstances where a single source is responsible for determining the pay and terms and conditions of the claimant and the comparator. Where an employee is engaged on like work, work rated as equivalent or work of equal value to a comparator of the opposite sex, he or she has the right to enjoy the same level of pay (and other contractual terms) as the comparator. This will be the case unless the employer can show that any differences in pay or contractual terms are due to a material factor other than sex. Common examples of valid defences put forward for differences in pay or benefits include seniority (provided it affects job performance); greater skills, experience or training relevant to job performance; unsocial hours; and better performance, providing this can be evidenced, usually as a result of an objective performance appraisal scheme. Alternatively, under EU law, the comparator may be someone who works for a different employer in circumstances where a single source is responsible for determining the pay and terms and conditions of the claimant and the comparator. Where an employee is engaged on like work, work rated as equivalent or work of equal value to a comparator of the opposite sex, he or she has the right to enjoy the same level of pay (and other contractual terms) as the comparator. This will be the case unless the employer can show that any differences in pay or contractual terms are due to a material factor other than sex. Common examples of valid defences put forward for differences in pay or benefits include seniority (provided it affects job performance); greater skills, experience or training relevant to job performance; unsocial hours; and better performance, providing this can be evidenced, usually as a result of an objective performance appraisal scheme. Gender Pay Gap & Equal Pay Reporting What s The Difference? 3

4 Gender Pay Gap Reporting Whilst the equal pay provisions of the Equality Act 2010 are concerned with the right of men and women to be treated equally in terms of pay, the main requirement under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 is for organisations with 250 or more workers to publish information. The information must list the average overall pay and the median overall pay for men and women throughout the organisation, together with the proportions of men and women in each of four quartiles of the employer s pay distribution (which each have to contain the same number of employees). Overall pay means the gross hourly rate of pay based on an employee s normal working hours. The difference between men and women s average hourly pay rates must be expressed as a percentage of the full-time male hourly rate. The information must be accompanied by a written statement signed by an individual in a senior position. Bonuses awarded to men and women respectively must be included in the published information, but employers may calculate the amounts of such payments in proportion to the relevant pay period (for example where bonuses are awarded annually). The published information must remain on the employer s website for at least three years and must be in a form that is accessible to all the employer s workers and to the public. There is also a requirement to upload the information to a government website where the information is listed according to sector and is available to the public at large. Enforcement The Equality Act 2010 provides the right for individuals to enforce their right to equal pay through the employment tribunal system. It is up to each individual to decide whether to pursue such a claim. Both men and women can enforce this right, irrespective of their length of service (in practice, most claimants are women). Because claims for equal pay are in essence claims under contract, they may, alternatively, be brought before an ordinary civil court. Whilst claims for equal pay taken to an employment tribunal must be lodged within six months of the end of the relevant contract, much longer time limits apply to the ordinary civil courts six years in England and five years in Scotland. Where a claimant is successful, the tribunal (or court) can make an award of compensation based on the difference between his/her rate of pay and that of the opposite-sex comparator, with back pay of up to six years before the date on which proceedings were instituted (five years in Scotland). This can prove to be a very costly exercise for the employer. In contrast, there is no provision in the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 for individuals to force their employers to comply with the legislation. Furthermore, there is no financial penalty for employers who fail to comply. Note also that there is no requirement under the Regulations for employers to: Provide an explanation for any pay gap Examine the causes of any pay gap Conduct a pay review following the collection of the pay data Create an action plan to address any genderbased pay gap that is identified Nonetheless, if an employer s gender pay gap reporting reveals a large gap between the pay of male and female employees (albeit based on average figures) and does not provide a credible explanation, this may motivate some employees to examine whether their own individual pay is on a par with that of any male employee doing the same work or equal work - and, potentially, to raise claims if they believe that is not the case. Expert Pay & Benefits Support If you are struggling to calculate the gender pay gap for your business, act now and call Croner Reward. After you send us your pay data, we will analyse and provide a statistical outcome - determining if you have a gender pay gap or not. We can then advise on how to close the gap, if required. Call to speak with one of our pay & benefits experts today. Gender Pay Gap & Equal Pay Reporting What s The Difference? 4

5 Let s talk PHONE ONLINE croner.co.uk Croner Group Limited registered in England & Wales, No Registered Office: Croner House, Wheatfield Way, Hinckley, LE10 1YG. Croner Group Limited is authorised and regulated by the Financial Conduct Authority. What We Do HR & Employment Law Advice & Consultancy Employee Assistance Programme Case Management Software Health & Safety Advice & Consultancy Training Courses Risk Management Software Pay & Benefits Salary Benchmarking Consultancy Job Evaluation Software Gender Pay Gap & Equal Pay Reporting What s The Difference? 5