Gender pay gap reporting webinar

Transcription

1 Gender pay gap reporting webinar Audio transcription of an XpertHR webinar in association with Personnel Today. A video of the webinar and the slides are available on demand at Original webcast: 8 February 2017 Good afternoon everyone and welcome to gender pay gap reporting, your questions answered brought to you by XpertHR in association with Personnel Today. I m Bar Huberman, senior employment law editor at XpertHR. It s fair to say that we ve been on a bit of a rollercoaster with gender pay gap reporting, but we do now have the final regulations. So, during the first half of this one-hour live webinar, our guest speakers will explain your duties under the legislation. We ll then use the second half to answer as many of your questions as possible. We ve had lots of great questions already, so thank you to everyone who submitted a question. We ll get through as many as we can, but do please keep sending them through and you can do so through the chat pane on the left of your screen. If we aren t able to answer your question today, it will help us to understand what guidance you need, so look out for FAQs and other resources on XpertHR. So, joining me today are two lawyers leading the diversity and inclusion discussion, in particular around the progression and promotion of women in the workplace Patrick Brodie and Kelly Thomson from law firm, RPC. Both are also contributors to XpertHR. Patrick leads the international employment team at RPC. Patrick has consulted on gender equality and pay for almost twenty years. He worked with the think tank Tomorrow s Company on the importance of gender diversity in enhancing organisational decision-making and corporate governance. And, alongside Kelly, Patrick advises governing bodies and national and multinational organisations on employee engagement, diversity and inclusion. Kelly has worked closely with advisory bodies on gender pay, including the CBI, Business in the Community and the British Services Association. Kelly is at the cutting edge of the debate on the issue. She has been asked to contribute to and has written various responses to the government s consultation on gender pay reporting and Kelly s work on gender pay draws together the law, organisational psychology and communications. I am now going to hand over to Patrick to take you through the regulations. Thanks, Bar, for the introduction and, as importantly, welcome to you, our audience, for today s session on looking at gender pay reporting. We do know that from April of this year we re going to have new legislation and giving that legislation its full title, it s the Equality Act 2010 (Gender Pay Gap Information) Regulations To help us those regulations are often 1

2 shortened to simply the GPG Regulations. To help us even further, I think what I ll do is I ll simply refer to them as the regulations in this talk. As we know, the regulations will require medium and large employers to measure and report on various metrics related to the gender pay gap. There are lots of qualative nuances for us, as employers, to work through when considering the regulations. For example, which employees to include? Now these groupings will vary for the different calculations. We ll look at which elements of pay and bonus pay to measure, when and how to value shares and options and which time periods to consider. And, once we ve done all of that and gathered the raw data, we then have to report against that data. Interestingly, despite the title to the regulations, this isn t simply about pay, it s actually much broader than that. The issue is about female progression in its broadest sense and it s also about making certain that the progression issue is also an issue on the board s agenda. The regulations do this by using transparency as a catalyst for effecting that change. It s part of a wider programme of activities just encouraging diversity within organisations. Last summer Kelly and I, in an earlier webinar, talked about those issues in a bit more detail. Gender pay gap isn t about equal pay. Now the ACAS guidance which has been recently published again reinforces that point. So turning then to the basics. Which employers are covered? The regulations themselves apply to employers in England, Wales and Scotland. Bear in mind that there are separate regulations which deal with Northern Ireland. It looks at employers with 250 or more employees on what s referred to as the snapshot date and that s 5 th April or, for the public sector, 31 st March. The definition of employee for the purposes of the regulations themselves is wide and I m going to look at that definition in a bit more detail later on. It s measured on a per employer basis, so it s not aggregated across a whole group. So each employer with 250 or more employees has its own reporting obligations, so you can imagine it s quite possible that a group might have some, but not all, of its companies which are covered by the regulations. Equally you might find that a whole group sits outside the scope of the regulations, even if in total the group has 250 or more employees. So for large corporates, and this has been part of our experience, you may well find that they have to produce several reports, one for each of the entities which employ 250 or more employees. So turning then to timing and logistics. As said, the regulations themselves will come into force on 6 th April this year, which is not far away. We are still waiting for the very final steps of its passage through Parliament. It s subject to a final legislative resolution. Now that s seen as merely a formality. So looking at the regulations as you read them, the high expectation is that that will be the form which applies. You have to collate data by reference to the first snapshot date and, as said, that snapshot date is 5 th April unless you are a public sector employer, in which case it s 31 st March. And then for each employee, what you re doing is gathering data for what s referred to as the relevant pay period in which the snapshot date falls. Now the length of the relevant pay 2

3 period, whether a week, a fortnight or a month, depends on how frequently the employee is paid. So, for example, for an employee who is paid weekly, the relevant pay period will be a week, if paid monthly the relevant period will be a month. And then as well as collating pay data, you have to collate bonus data running back over the preceding twelve months. I m going to turn then to the next bullet point, which is publication requirements. Employers first publication will be at some point between 5 th April and 4 th April You ve got a twelve-month window and employers can decide within that window when they publish. The obligation will be to publish data twice, once on your own website and also on a government-hosted portal, the aim drives the idea that it is about facilitating transparency and scrutiny. So turning to your own website, when you publish on your own website, it has to be accessible to staff and the public and it has to be retained for three years. As I said, you also have to upload the data to a government portal. Now the government, in earlier consultation, said that it had planned to produce publically displayed tables and that was partly with a view to highlighting employers who published particularly full information. Interestingly, there was also the possibility that it might identify employers known not to have complied. So a sort of naughty and nice list. Now what precisely that government portal looks like remains to be seen, details are limited, and that s partly driven by funding, or the absence of funding. The recently published ACAS guidance says that details of the government portal will be made available closer to 5 th April, so we re waiting for those details to come through. Turning then to the report. The report has to be signed as being accurate by the most senior level of leadership of an employer. So, for example, a director for a corporate, a partner for a traditional partnership. And then, for every subsequent year that you, as an employer, meet the 250+ employee threshold, you have to publish a further report. You can vary the dates on which you publish, provided it fits within twelve months of the relevant snapshot date. Let s go through to groups of employees who are covered. And in many ways these categorisations are key to understanding how the regulations operate and equally for the effective collation of data. In my mind there are three key employee definitions. You have employees, there s then relevant employees and then full-pay relevant employees. Now the definitions themselves are relevant to different assessments. The term employees is specific to determining the 250+ employee threshold. Conversely the reference to relevant employees is used for the purposes of bonus data requirements. And then the third reference which is to full-pay relevant employees that relates to reporting statistics relevant to pay. What I am now going to do is just look at each of those categorisations in just a little bit more detail. I ll take them in turn. So the first term is employee and as I said that s relevant for assessing the 250+ threshold. The term isn t defined in the regulations themselves, so you won t find it there, but if you look towards the back of the draft regulations, you will see 3

4 that there are explanatory notes, which give a bit more colour and flavour to the regulations. Those explanatory notes confirm that the definition of employee is the one used for the purpose of the Equality Act That s where the employee definition flows from. And when you look at the Equality Act 2010, you see that an employee definition will cover anyone who is employed under a contract of employment, a contract of apprenticeship or, the third category, a contract personally to do work. Those are the three categories of individuals caught. What it excludes is self-employed people and volunteers. Now, for those of you who are operating within the environment of partnerships and LLPs, it is worth bearing in mind that the regulations as drafted, for the term employees captures, partners of LLPs, and traditional partnerships, but that category of people is then subsequently ignored for the purpose of pay and bonus calculations. They go to, though, to determine the 250 threshold. The anomaly, curiously, the ACAS guidance which is published to describe how the regulations operate, suggests though that partners are excluded from those who go towards calculating the 250 threshold. Now, in my reading, that interpretation applied by ACAS doesn t correlate with the definitions in the regulations. In my mind, the employee definition will cover employees, partners, casual workers and some contractors. And just breaking that down into a bit more detail, each of your part-timers will count as one employee. If somebody is in a job share arrangement, then every employee within that job sharing arrangement will count as a separate employee. It covers zero-hours workers. And the definition will also cover some overseas employees where their employment has a strong connection with Great Britain. And that s a test which comes out of the Equality Act. As I said, the people who are excluded are true selfemployed. Going then to the second definition relevant employees. As I said earlier on, this term is relevant for the bonus gap calculation and also for the bonus proportion figures. Now the relevant employee definition almost covers the same category of people as in the earlier employee definition, but it s subject to two exclusions. The relevant employee definition excludes partners and LLP members. It also excludes some casual workers and contractors. Now that s because it s recognised that the inclusion of casual workers and contractors in the definition of relevant employees ran the risk of giving rise to some practical difficulties in finding pay records. If you think about it, whereas remuneration and working time records for conventional employees are typically centrally stored in an employer s payroll or HR system, that is often not the case for other workers. And the government actively acknowledged this difficulty in the final draft regulations. So the regulations themselves contain an exclusion for contractors and those are contractors for whom the employer doesn t have, and it s not reasonably practicable for them to obtain, the relevant payroll data. Finally, the third employee category, which is full-pay relevant employee. This definition flows through when you re looking at your pay gap 4

5 calculations and your pay quartile proportion figures as well. So this almost feels like Russian dolls. So I m breaking it down further. Save for one difference, the definition full-pay relevant employee actually covers the same employees who fall within the relevant employee definition. As I said, save for one difference, and the one difference is because full-pay relevant employee excludes, very specifically, employees who are absent from work during the relevant pay period, during which the snapshot date falls, because of leave. For example, sick leave, maternity leave, other family-related leave. And also and this is the important bit they receive less than full pay as a result of that leave. You can see a converse situation where if an employee receives less pay than usual for reasons other than leave, they will count as a full-pay relevant employee. So those are the three groups of the categories of employees caught by the regulations. I will now hand over to Kelly, who will look at how you calculate the hourly rate of pay and also data publication requirements. Thanks, Patrick. Okay, so at this point in your analysis, then, you ve worked out that you have sufficient people in your workforce to meet the threshold for reporting. You ve also looked at that staff group and worked out who would be a relevant employee and therefore whose bonus data you need to capture and who would be a full-pay relevant employee and therefore whose pay data you need to capture. But unfortunately there are still a few more terms and definitions you need to get your head round before you re ready to run any of the actual calculations. So I m just going to cover those now and then we ll look at, as Patrick said, what you actually have to calculate. So the first concept to come to terms with is the idea of a pay period and this will vary amongst your workforce by employee, potentially. In the first flush, the fact that it might vary amongst your workforce might sound a bit odd, because how can you run a comparison if you re not comparing like with like. But it s fine in the end, because you start with a pay period for the purposes of gathering your raw data and then what we do is we apply a formula to that raw data to get us to an hourly rate of pay for everybody that you re looking at. And that gives you your apples with apples to compare to each other. So we ll come on to that formula in a moment. The pay period for each individual employee that you re looking at is defined by how often you pay that employee their basic pay. So, as Patrick suggested earlier, that will often be weekly, monthly, perhaps for some of you, you have fortnightly paid people or people paid on some other period basis. Whatever that individual is paid, however that individual is paid, will be the period for that person. And what you need to do for each of those individuals that fall within that category of full-pay relevant employee, is collect their data for one pay period. And that pay period is the specific pay period, within which your snapshot date falls. So for the private sector employers listening in that would be 5 th April. For those public sector employers that would be 31 st March. So for each of those individuals, it s the pay period within which that date sits. That is that person s relevant pay period as defined in the regulations. 5

6 So you ve got the relevant pay period, but what are you actually capturing in that period? What do you need to record? Some of you might remember that in the earlier draft regulations, there was a non-exhaustive definition of pay and there was some concern that was expressed during consultation, that that was a bit confusing and might leave too much room for judgment calls and different positions taken by different employers. So the government recognised that and the new regulations that we re looking at today now have exhaustive definitions both of ordinary pay and bonus pay. And for those of us who are going to have to apply these regulations and actually run the calculations or build the software to run the calculations, I really would urge you to have a look at those definitions in the regulations. Use them like a checklist, make sure that the data that you re capturing is all of that data that s listed and nothing more, nothing less. Just to run through, then, very quickly, what is covered in those definitions. Ordinary pay is basic pay, allowances, pay for piece work, pay for leave and shift premium pay. It is expressly not remuneration that s referable to overtime, and we ll come back to that, or remuneration that s referable to redundancy, termination of employment, in lieu of leave or remuneration other than in money, and we ll come back to that as well. Bonus pay has a separate definition and that is money, vouchers, securities, securities options, interest in securities, we re talking about shares and share options here, where they relate to profit sharing, productivity, performance, incentive or commission. And I m reading this from the regulations. And again that expressly does not include overtime or redundancy or other termination payments. So let s just pick up on a few of the nuances in those definitions, because I think it s really important to make sure that you understand them and that you capture them in your system. So overtime is excluded from ordinary pay and from bonus pay. Overtime pay therefore is not counted in your analysis of the gender pay gap or the bonus pay gap. And what that means, in essence, is that there s an in-built distortion, if you look at it in one way, in that it s basically recognised in most sectors that oftentimes men might be more able to work overtime than women, due to disproportionate childcare responsibilities. So that won t be taken into account, because that overtime additional pay will be ignored for the purpose of the calculations. And this was raised during consultation by many of the respondents. The government recognised that as a potential issue, but they were also loath to create a potential perverse incentive for employers to force women to do more overtime with a view to improving their gender pay gap. So that s the thinking behind excluding it. It also follows the ONS methodology for calculating the gender pay gap, so it increases comparability with the national figures. Conversely, and I think it s worth flagging this because it doesn t necessarily follow logic, shift premium pay is included. Overtime is out, shift premium pay is in. I mentioned there that the definition of pay excludes also the payments that are made other than in money, and what that means is that the value of salary sacrifice schemes or benefits in kind are excluded from the analysis. You don t go off and do a valuation of any of those benefits and include it. If it s not paid in money, it isn t counted as 6

7 pay. So just to give a simple example, if you have individuals who are paid a car allowance through payroll, the value of that allowance will be included in the calculations, but if you have individuals who, instead, are given a company car as a benefit in kind, the value of that car will be excluded and ignored for these purposes. So there s an in-built potential inconsistency there. Another nuance or point to note in relation to bonus pay is to remember that this includes shares and share options and I can see a few of you have put questions up about this. The regulations used to be drafted in a way that was a bit confusing around shares and didn t really give you much guidance about how to calculate it. That s been clarified a little in this draft, which is helpful. When you re dealing with shares and share options, the regulations now say that you deem them to be paid at the time and in the amount in respect of which they give rise to taxable earnings. So you track the income tax regime for the purposes of shares and share options. So once you ve done that, you ve gathered your raw data for each of the employees you re looking at for their pay period. You ve then got, in the regulations, a six-step procedure for drilling down that raw data into an hourly rate of pay for each person, to give you that comparable data. And I would say just follow that process as it s set out in the regulations, it s pretty clear and it takes you through step-by-step. One point to note is that the process that you follow varies, depending on whether you re dealing with an employee with normal working hours that don t vary or no normal working hours or variable working hours. So if you re dealing with an individual who has non-variable, normal working hours, it s quite straightforward. You just take their contracted hours, for example 35 hours a week, and those are the hours that you use for calculating their hourly rate of pay. If, on the other hand, it s somebody with no normal working hours or with working hours that vary, then you run a twelve-week averaging process, looking back at the twelve weeks prior to the snapshot date, and that will be familiar to those of you who have had to do a similar analysis for the purposes of holiday pay. There s a bit of a niggle in-built into this aspect of the regulations, and that relates to leavers or new joiners. So take, for example, a new joiner who is in post on the snapshot date, but hasn t been there for the whole pay period. Then they would obviously earn less than they would in any other month or week, whatever their pay period is. If that s a person with no normal working hours, that s fine, because you will be doing an averaging process which will take into account the fact that they ve had fewer hours and therefore their hourly rate would reflect that. However, if you ve got an individual with normal working hours who is a new joiner, that averaging process doesn t come into effect and you have to use their full contracted hours, taking my example earlier, 35 hours, and apply that to their lower pay that they happen to have earned that month, giving you a distorted lower hourly rate of pay. There s nothing in the regulations to help you there. If that s an issue for your organisation, and it applies, for example, to lots of people, you might want to cover that off in a supporting narrative to explain if you think that might have skewed your figures. 7

8 The final point to note then on that hourly rate of pay point is the influence and the use of bonus pay in this calculation. So bonus pay is included both in your bonus analysis, which we ll come on to, but it s also included in your pay gap analysis, if the bonus is paid in the relevant pay period. So if someone is paid a bonus in July or January or December, it s not going to fall to be included in your pay calculation. If it s paid in March/April, it may well do. If, however, that bonus that is paid in the pay period relates to a longer period of time than that pay period, for example it s an annual bonus, you re paying it to a monthly paid employee, you don t include the entire bonus, you just include a pro rated amount that relates to that pay period. So you effectively include one twelfth of that bonus, which is a helpful addition to the regulations. Kelly, before you move on, could I just ask you a quick question, which we ve had from a few people. When deciding whether or not you need to include somebody in the calculations, do you exclude people who have left during the relevant pay period? That s a really good question. It s about who is in place on the snapshot date. So if that person is in place on 5 th April or, public sector, 31 st March, they fall to be included, even if they then leave the following day, which would have the same distorting effect on the figures, potentially, as the new joiner that I was describing. So, again, that might be something you need to speak to in the supporting narrative. It s all about taking a snapshot on that one day. Okay. Thanks very much, Kelly. Not at all. Okay, so we ve finally got to the actual calculations that you need to do. So you ve had to do all of that analysis of who you re capturing, what you re capturing, over what period and then apply a formula to that to get yourselves down to an hourly rate of pay. You ve got then six sets of data to gather and report against and there s one general point that I just want to make and I think it s an important point that I think on one level is obvious, but on another level is often missed, understandably, particularly given the way some of the gender pay gap legislation has been reported. This is about overall pay gaps in an organisation. So nothing in these regulations requires you to drill down any further than an overall gap across your organisation. It doesn t, for example, require you to compare within a grade or a career level, it doesn t require you to do a part-time gap analysis or a full-time gap analysis or by age or anything else. There might be really good reasons why, as an organisation, you might choose to do that, and you might take advice as to whether that s a good thing to do, how you do that, bearing in mind your various other legal obligations, but I just want to be clear that these regulations don t require that. What they do require, first of all, is for you to report on the gender difference in the mean hourly rate of pay of your full-pay relevant employees. So full-pay relevant employees, to reiterate, as Patrick said, that s excluding people who were on leave at any point during the relevant pay period and weren t being paid in full. So if they were on unpaid or maternity leave or if they were on SMP during that period, they wouldn t be 8

9 included in this particular analysis. Just going back to GCSE maths, the mean we will remember is the sum of all of the values in the list divided by the number of values and the advantage of the mean is that it shows the full earnings distribution, which is useful, because women tend to be overrepresented at the lower earnings extreme and the mean would take that into account. So what you would do for this dataset is add together all the hourly rates that you ve calculated for your male full-pay relevant employees and divide that by the number of male full-pay relevant employees, giving you your mean male hourly rate of pay. Do exactly the same for your female full-pay relevant employees and then you calculate the difference between the two and express that as a percentage of the male mean hourly rate of pay. So you do that by deducting the women s mean from the men s mean, divide it by the men s mean and multiply it by 100. This is all set out in the regulations quite clearly. And it s that percentage that is the only thing you are required to publish. There is no requirement to publish your working out, although of course you might choose to do so. So to put it in pound sign terms, if you worked out that your female mean average hourly earnings were 8 an hour and you men s were 10 an hour, you would be publishing a 20% gap. Data number two is the gender difference in the median hourly rate of pay and the median, just to recap, is the middle value in a list when you list those values in numerical order, from lowest to highest. And that s more representative than the mean of the typical difference. And it s also what s used in the ONS national statistics, so again is helps with comparability. And you take exactly the same approach as you took with the mean gender difference. You just use a median average, rather than the mean. Number three is reporting the gender difference in the mean bonus pay in the last twelve months and the reason that employers are being required to do the separate bonus calculation is because of the recognition that a lot of the sorts of issues that this is driving to change can be hidden in bonus. Bonuses are often discretionary or have a discretionary element and some statistics suggest that the bonus gap taken alone is potentially around 57% nationally, so the government decided to bring bonus out as a separate measure. So what you do is you take the full distribution of the bonuses that you have made in the twelve month period ending with the snapshot date. So that s not just bonuses that happen to be paid in that relevant pay period, which is what you use for pay, that s any bonuses paid over that twelve month period and you take the same approach as you did for pay, you publish the difference between the mean average bonus for your male relevant employees and that for your female relevant employees, again expressed as a percentage of the men s mean. The difference between this and pay, as we touched on, but just to draw out, is that you include employees who are on leave, even if they re not being paid in full. So, for example, you would be including your maternity leave employees, which clearly may have a distorting effect on the figure. You also include people who are employed on the snapshot date, even if they ve not been there for the full twelve months, just picking up on one of 9

10 the questions that I ve seen being asked. Again, that could have a distorting effect. The issue being that you include the full cash figure of the bonus, you don t do any analysis to work out a pro rated amount or an hourly rate like you do with pay. It s the full cash figure, which will be distorted by anyone who works part-time, new joiners, any adjustments you might have made for absences etc. So something else to go on your list of issues to include in your narrative. And then really quickly, you do exactly the same analysis for bonus on a median basis, that s a new addition since the earlier draft regs and then you go on to report on the proportion of men and women who received a bonus in the last twelve months. So what percentage of your male relevant employees received a bonus and what percentage of your female relevant employees. And, finally, number six, the final requirement is to set out your hourly rates of pay by four salary quartiles, so line them all up in order and divide them into four quartiles with the same number of people in each quartile. Then work out from that, in each quartile, what percentage of that quartile is men, what percentage of that quartile is women. So just to bang that point home, each quartile should add up to 100% or you ve gone wrong somewhere and you need to get the calculator back out. And the idea here is that it gives you a sense of the distribution of pay in your organisation and you can see if women, perhaps, are concentrated at the lower paid job end of the spectrum. And then the final point, point seven on the slide, is that a narrative is not required, but it s strongly encouraged in the consultation, in the ACAS guidance, all the government communications. Patrick and I think that the narrative is going to be key for many if not most organisations to explain the figures you re reporting, set them in context, to explain the methodology, to deal with the niggles, some of which we ve flagged, but also really to set it in the context of your organisation s diversity and inclusion journey to date and just strategy for closing any gap you might have identified going forward. If you don t put the context around the figures, then those figures are open to all sorts of interpretations and, potentially, misinterpretations as well. So that s all we are going to cover in terms of that overview. I think, Bar, there s quite a bit of time left for questions. Yes. Thanks very much to both of you. So I hope that has given everyone a good understanding of the regulations. So we re now going to turn to the audience s questions and firstly we re going to drill down into the nitty gritty of some of the aspects of the legislation and we re going to follow that by discussing some of the best ways of dealing with the impact of reporting your gender pay gap. And if you re interested in finding out about the background to gender pay gap reporting, including the reasons why there s a gender pay gap, then you can listen to our previous webinar with Patrick and Kelly, which is on the on-demand webinar page on XpertHR. 10

11 So we re going to start with questions on deciding if you re a relevant employer and our first question comes from Rebecca. Do organisations with fluctuating staff numbers, say between 240 and 255, need to comply? The assessment is very much around the number of employees engaged on you re looking back again at the snapshot date, and that s when you run the calculation, How many of our employees are employed on this date? Does that number meet 250? And that then drives your publication requirements. If it s below the 250, there is no obligation to report. It s worth bearing in mind that I ve had some conversations with organisations, where you re quite close to that limit, you might fall just shy, that a decision needs to be made and that decision is partly based on the fact that when you re reporting, you have to hold the report for three years on your website. So if you don t report in a particular year, sometimes you re creating a gap and clearly there s a clear rationale to that gap, which is, Didn t meet the threshold But if you are using your reporting obligations as a mechanism to engage the outside world employees, investors, stakeholders you might, even if you fell below that level, think about including a report because then you ve got continuity to that story, continuity to your narrative. And certainly that s what the government consultation and the ACAS guidance would encourage you to do. Yes. Okay. Thanks. Lots to think about there. Julia asks, Our company headquarters are based in the UK, but we have offices in Norway, Australia, Houston and Dubai where we employ local employees on local contracts with no ties to the UK. Am I correct that these employees wouldn t need to be included in the count of 250 when determining if we re to qualify for gender pay gap reporting? Thanks, Bar and Julia. Based on what you said, it feels pretty likely that those employees would not count. It sounds difficult for them to establish that they ve got a sufficiently strong connection with Britain and British employment law to be counted as an employee for these purposes. It sounds like they live abroad, their work relates entirely to the country where they live and not back to the UK business, they re paid in local currency, they re on local contracts, presumably they re managed locally by HR etc. It would be difficult for them to establish a sufficient link. But as a lawyer I would say I d need to look at the contracts. The value in terms of having Kelly here is that I don t have to add anything to that. I think it would be difficult to envisage them falling into the definition. Okay, let s move on to deciding whether or not somebody is a relevant employee. I know you ve already mentioned casual staff, but we ve had lots of people ask about agency workers. So, for example, Ruth is asking do staff employed via an agency have to be included in the reporting? 11

12 In terms of that, Bar, the answer to that lies in terms of who the actual employer is of the agency workers. So often you ll be in an arrangement where individuals are supplied via an agency, but where the individuals are actually employed by the agency. So, for the purposes of the threshold, those individuals won t count if you use that agency workforce. The number will count, though, for the purposes of the agency employer. Okay, thank you. And a few people have asked about this, including Eileen. She asks, Is it reasonable to exclude our board, because they re not employees and in fact I suppose this is something that you might be asked by the board yourself. Yes, it rather ups the ante, doesn t it? Usually executives, directors would be employees. They would have a service contract, in which case they would absolutely be included, in contrast, for example, with members in an LLP or partners in a partnership who count to the threshold, but whose data isn t captured. So executive directors who have a service contract will be included. Non-executive directors, it really depends on the arrangement. If they ultimately have a contract personally to perform a service, then they may fall to be counted. There may be non-exec directors who are that one step removed, perhaps they are not under any kind of element of subordination to the organisation, which might often be the case for non-exec directors given independence requirements. It s going to be a case-by-case analysis. I don t think you can say just because somebody is on the board, they fall either way. It s always about the way in which they re engaged by the organisation. Yes, I agree with that and I think that in many ways the key, because it s the salary and remuneration, particularly around equity arrangements, will be in terms of executive board members who by their nature will be, almost invariably caught, be engaged under, essentially, service agreements, employment contracts. Okay, thanks for that. We ve had a few people ask about this, including Nick. He asks, Who is a relevant employee, and this is specifically relating to secondees from abroad working in the UK and those who are seconded to work abroad from the UK? I think in terms of those seconded to work overseas, the issue still comes back to a sufficiently close connection to Great Britain. So it s the traditional test on the Equalities Act. So if there is that, albeit those are seconded, if there s that connection then they fall within the number for the purposes of the calculation. And, as Kelly said when answering the earlier question about, essentially, Scandinavia you are looking at a variety of elements which go to answering that question of a strong connection with Great Britain. So where is the individual s home? What currency are they paid in? You may well be looking at pay and pension structures they are subject to. The law which governs their employment will be relevant. And, again a point mentioned by Kelly, is where are HR issues handled? Are they handled back here in the UK? No one of those elements will be determinative, you look at those issues in the round. 12

13 Okay. Thanks very much. Now this is an interesting question from Lucy. She wants to know when would it not be reasonably practicable to include contractors in the figures? That is a great question. Just for anybody who hasn t had to look at this, because we did touch on it but briefly earlier, the regulations, as Patrick was explaining, extend to people who are under a contract personally to do work, but there is a limited exception for those people, where you can exclude them from the data if you don t have their pay data and it s not reasonably practicable for you to get it. So the question that Lucy has asked, which is a good one, is when would it not be reasonably practicable? ACAS guidance touches on this. They suggest that it would be reasonably practicable to obtain the data if you have, for example, a project initiation document or a schedule of fees which might, with a little bit of calculation, give you want you need. And they also say if you don t have that consider, as an organisation, whether it might be reasonably practicable for you to get the data, perhaps by asking the individual themselves? We were running a session on this topic last week and most of the organisations in the room felt like the contractors that they engaged, they would and should be able to get to that data, because, presumably, they were paying those people. They might be submitting timesheets or the equivalent and they felt that it wouldn t be unduly onerous to get to it. Clearly, it would be different in different organisations. Another interesting point in the guidance, and this isn t law, it s the guidance, but there is a suggestion by ACAS that when you re entering into new contracts going forward, you should seek as far as possible to ensure that those people who are employed under that contract personally to perform work are required to provide you with this information, so that you can comply. It s an interesting question for your organisation as to whether, for example, when you re entering into a consultancy arrangement do you now add a clause that requires that person to cooperate and provide the data you might need, thereby making it reasonably practicable for them to get that data. And I don t want to sound cynical, but this is one of those areas where each organisation is just going to have to make a judgment call. Ultimately, what you end up publishing is quite high level and is statistical. It doesn t necessarily, unless you choose to, show all of these decisions that you ve made. So you need to come up with a decision that you can justify internally and that you feel you can apply consistently. But at the moment there is no mechanism for those judgment calls that you ve made to be challenged. Thanks, Kelly. And I think that judgment call issue applies to a few of the issues in the regulations, doesn t it? Absolutely. I m just going to ask one more question about relevant employees, which a few people have asked about, including Tracy and she wants to know how do you count transgender employees? Thank you, Tracy, for asking the question. That question is addressed, to an extent, within the ACAS guidance because essentially when we re 13

14 running the calculation it s driven by an individual s gender. So the recommendation is you re going back and you re asking individuals to return in terms of how they self-identify. But you might be in circumstances where an individual doesn t self-identify and doesn t respond to that question. If that s the case, then they fall outside of the calculations. They are simply not taken into account for the purposes of them being a relevant employee. On one level the regulations are a bit of a blunt instrument. They require these pots of male and female employees, but they don t define what s meant by male or female. If you have individuals who don t identify at all with a gender, they ve either chosen not to respond or they don t identify with one gender, then you ll have no choice but to leave them out of the calculations. I think it s one of those things where I would think most organisations won t have a lot of people that fall into this category, but when somebody does fall into this category, people where you are not necessarily sure which gender, you re going to want to make sure you get that right, because that s going to be fundamentally important to that individual and you, as an employer, will want to be sensitive that. So it s one of those case-by-case ones. You may have the data on your HR or benefit systems anyway and you may wish to check it or you may need to simply make a judgment call. Thanks. And I know, Kelly, you mentioned this when we discussed gender pay gap reporting in the past, that would you suggest that if you make a judgment call, you make a note of this for future years for when you re reporting, so that you re consistent? Yes. I definitely think there s a benefit to that in the sense that you re not always going to have, as you suggest there, Bar, the same person doing the analysis. It s one of those things, once you ve got that noted down somewhere it s an available piece of information. You may not have control over who sees that, so you re going to want to be happy that you can justify that judgment call that you made if you re going to commit that to paper in particular. But assuming that you are happy with that, then it makes sense to set up a consistent system, I think, that you then follow as an organisation. And then if trends emerge on some of these nuances and the market or guidance changes and says actually we think people have been taking the wrong approach to this unclear issue, then you re perhaps able to change that, but at least you re building up that internal history of the decisions that you ve made. And it would help with putting together your narrative as well, to know what methodology you ve used internally. Equally, Bar, one thing you ll bear in mind is the sensitivity around some of that information, so there will be suitable checks and balances in terms of protecting it. Thank you. So let s move on to questions around calculating the hourly rate of pay and bonuses as well. Tania asks do we exclude payments in arrears and overpayments as well? Yes. The six-step formula that I mentioned, that s set out in regulation six, to get you an hourly rate of pay, step two of the six-step formula states, 14

15 and I m quoting, Where an amount identified under step one is an amount of ordinary pay, exclude any amount that would normally fall to be paid in a different pay period. So for ordinary pay purposes, not bonus pay, this only applies to ordinary pay, we take that to mean, for example, a correction in an overpayment and it s not necessarily pay that would ordinarily be due in that pay period that you would exclude it. Okay, brilliant. Now Alison wants to know what do we include for workers sleeping on the premises on-call? There s a certain trickiness in that. The reason why I say trickiness in looking at, essentially, sleeping arrangements which may well be a combination of on-call, but for these purposes I m going to treat it as sleepin, and that s broadly an arrangement, if I m right, where somebody is provided with sleeping facilities at a premises and they make themselves available to perform work as and when that work comes on stream. They then wake up, they perform their work during that period when they re awake. And the challenge with that is there has been probably over the last three years or a bit longer, an enormous amount of debate about the extent to which, for the purposes of the National Minimum Wage, sleeping arrangements and the time spent on sleeping, whether all of it should be treated as working time or whether, as anticipated by a particular regulation, which is regulation 32, only those hours when a person is awake and working should contribute. HMRC take quite a doctrinal view on this and they say that if an employee who is on a sleep-in arrangement has to be there, then all of the time should be treated as working time. And that s the way that these regulations would operate. Conversely, there s a good argument in terms of the way that the regulations are drafted, that equally when the regulations were introduced by Parliament in 98, why it should only be those hours when people are awake. It is sort of a long way of coming to a conclusion, which as an organisation when you look at these issues, the way that you treat sleep-in for the purposes of National Minimum Wage should match the way that you treat those hours for the purposes of reporting. The difficulty is if you treat them slightly differently, you d have to explain why. The only other observation is the ACAS guidance which sits alongside the regulations adopts a view which is much more puritan and aligned to the original regulations. It doesn t quite reflect the position of HMRC. Okay. Thank you, Patrick. I m going to move on now, because we ve had so many questions in, so many brilliant questions in about how you present the data, so for anyone listening out there who hasn t had an answer to their question about what s included in the pay and bonus payments, do look out for our FAQs and other content that we ll be publishing, because we will try and address your questions. So let s just move on to presenting the data now and the first question is, Julie wants to know, Can we choose the format for reporting, or are there specific guidelines that we need to adhere to? 15

16 You can choose the format, in essence. The consultation document has an example table, there s no magic to it, an example kind of table for how you might want to set out the pay quartile data, but it s an example. It s up to you how you format it. Which is helpful, I think, because you can then brand it in the way that you would want to brand any other information that you put out there on behalf of your organisation. And the publication requirements, if you think about them, on one level are quite narrow and vanilla because you re producing six sets of data, six figures, with more of a diagram to show the quartiles, but beyond that there is no other obligation. So when you look at that information at that level, it says very little about the organisation, it says very little about the workforce, the people, the diversity, the programmes which might have been put in place to improve professional women in an organisation and part of the analysis that an organisation will be going through now in preparation for its reporting obligations between 5 th April and 4 th April 2018 is to what extent will it provide a narrative over and beyond the simple reporting requirements under the regulations? And many organisations will take the view that that additional narrative, which gives figures context, feeling, colour and flavour, it s critically important to giving a sense of what they mean. Because absent that, as we all know from life, we can apply what we like to statistics. That s a really good point and we ve had lots of questions relating to that. Andy wants to know if there are there any additional metrics that you would incorporate to help identify and address any gender pay gap? It s a great question that we could spend way more than an hour talking about. There s a lot of useful information and suggestions out there, lots of good research. Just to give an example, and I m not affiliated to them, but as an example Business in the Community have got lots of toolkits on their website that some of you might find useful. It s the kind of thing that you would want to sit down with your trusted advisors and talk through. A lot of it depends, again, on what you think might be the issue in your organisation, or the multitude of issues in your organisation. Examples of things that you might decide to do to support your assessment would be, you might want to look at whether you ve got a part-time gender pay gap and compare it to full-time gender pay gap. You might want to look at fulltime males and compare that to part-time women. You might want to look at pay grade levels, you might want to look at seniorities. There s various ways of cutting the data, but without wanting to sound too much like a boring old lawyer, I want to reiterate that word of caution, that there s a difference between an equal pay audit, which is about comparing like with like within your organisation to see if there is an equal pay potential issue. That kind of thing you need to think very carefully before you do and think about legal privilege and all of the other ways that you might want to protect that data to give you the best opportunity to fix it and do all of that without, potentially, creating litigation straight away. So I would say take advice on that. But putting that word of caution to one side, there s lots of different metrics and ways of cutting the data that you might choose to undertake alongside 16