The first year of gender pay gap reporting through the lens of the payroll industry.
GENDER PAY GAP REPORTING The first year through the lens of the payroll industry
cipp.org.uk
GENDER PAY REPORTING
THE AIM OF OUR RESEARCH WAS TO UNCOVER HOW THE FIRST YEAR OF REPORTING GENDER PAY GAP RESULTS HAD DELIVERED, THE POSITIVES, THE NEGATIVES AND THE LESSONS LEARNED.
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Contents
Executive summary
4
Introduction
6
Background
8
Research findings summary
10
Communications
11
Looking ahead
12
Snapshots from the viewing service
13 13 13 14 14
Acas
BP
Equality and Human Rights Commission
Virgin Money
Viewing service statistics
16
Compliance and enforcement
17
Case studies from payroll
19 19 19 21
Case study 1 - private sector
Case study 2 – software development
Case study 3 – public sector
Challenges and concerns
22
Conclusions and recommendations
24
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Executive summary
“What gets measured gets managed…what gets publicly reported, gets managed even better” summed up the decision made by Friends Life to begin reporting its gender pay gap as a workplace issue in 2012 and which resulted in them being the 2014 winner of the BITC Transparency Award.
The aim of our research was to uncover how the first year of reporting Gender Pay Gap results had delivered, the positives, the negatives and the lessons learned.
The payroll profession spans many disciplines and we sought to hear the views from as many representatives as possible, such as software developers; in-house and outsource providers; and because we had highlighted education and guidance as an area of exploration it was important to consider the source of information from technical writers and professionals working in training and education. Keys areas of interest included software support, previous experience with gender pay gap reporting, communications, guidance and education, the all-important implications of failing to comply – what would the consequences be and of course, what lessons have been learned that would benefit the stakeholder experience going forward. l Software developers were important to the immediate communications piece but as we would expect, payroll professionals proved to be key element within the process, with HR coming a close second together and as was hoped for, from the outset of the policy development for gender pay gap reporting, buy in from senior management was essential.
l Lessons learned would see much earlier preparation in year two, and there is increasing expectation that technology will deliver in year two, what it was unable to deliver in all cases for the first year of reporting.
The EU referendum held in 2016 was identified as the main culprit for the delay in finalising regulations and in providing finalised non statutory guidance. The impact of Brexit hit early with this and many other government
policies that impact payroll as it caused havoc to the parliamentary timetable.
However, much work has been done this year to retrieve the correct data so many are feeling confident that the next gender pay gap reports will be less labour intensive. Nevertheless 47% of survey respondents said they would do something differently in the second year of reporting.
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l Numbers of employers uploading their results to the gender pay gap reporting service continue to increase slowly but in scanning published reports, it was revealed how diverse companies are when it comes to displaying their gender pay gap data together with the written statements and narratives and also what action companies are taking to address gender imbalance and reduce their gender pay gaps. l Throughout our research the total commitment and engagement of members of the profession and more widely across all sectors, to this policy and to the mandation of gender pay gap reporting, has shone through. This can be demonstrated through the gender pay gap viewing service and across all sectors where there are many good examples to be found of employers taking action to implement measures needed to reduce gender pay gaps. l The inclusion of research findings that had previously gathered views about the proposed measures that the Equality and Human Rights Commission (EHRC) intend to take to enforce gender pay gap reporting we can see that there is agreement that it is reasonable to prioritise enforcement action for failure to publish information in the first year and the proposal for an escalating response to be taken by EHRC appears to be sensible. Nevertheless the CIPP continues to call for a ‘light touch’ approach to be taken for year one, in recognition of the impact that delayed regulations and guidance had on employer and industry preparation. l We need to see the Government Equalities Office together with Equality and Human Rights Commission reclaim the headlines. Confusion abounds around the difference between equal pay and gender pay gaps. This is not helped by the media sensationalising their headlines. l The Secretary of State will review, within five years of commencement, these regulations and publish a report on whether they meet policy objectives or impose an unnecessary burden. There have already been many calls for a review of the elements of pay and reward that can be included within the average hourly rate. Significant concerns continue to be raised by the potentially misleading results caused due to the exclusion of the value of salary sacrifice amounts. l Regulations need to be finessed to match non statutory guidance - where the average hourly rate will distort the results and the hourly rate is clearly known during the snapshot period and guidance would benefit from the inclusion of more examples. Many factors will need to change in order to achieve full transparency, diversity and inclusion, but what this research has shown us through survey results and in face to face interviews and discussions is that all sectors within the payroll profession have, as they do with all other new mandatory requirements, engaged wholeheartedly to ensure the successful delivery of gender pay gap reporting.
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Introduction
The gender pay gap has always been a topic of interest, but in an attempt to increase awareness and improve pay equality, the UK government introduced compulsory reporting of the gender pay gap for organisations with 250 or more employees by April 2018.
For the UK as a whole, the gap has reduced in the last 10 years but is still in favour of men. According to the Office of National Statistics (ONS), the UK’s current mean gender pay gap is 17.4%, while the median figure is 18.4%.
The gender pay gap is defined as the difference in median pay between men and women. The ONS headline measure for the gender pay gap is calculated as the difference between median gross hourly earnings (excluding overtime) as a proportion of median gross hourly earnings (excluding overtime) for men. But crucially this measure does not take into account equal pay for equal work. The gender pay gap differs from equal pay. Equal pay deals with the pay differences between men and women who carry out the same jobs, similar jobs or work of equal value. It is unlawful to pay people unequally because they are a man or a woman. The gender pay gap shows the differences in the average pay between men and women. If a workplace has a particularly high gender pay gap, this can indicate there may be a number of issues to deal with, and the individual calculations may help to identify what those issues are. In some cases, the gender pay gap may include unlawful inequality in pay but this is not necessarily going to be the case. Much confusion exists when it comes to the two definitions and debate continues to gather pace.
The following pages seek to narrow focus to the experience of gender pay gap reporting as seen through the lens of the payroll Professional.
The phrase “What gets measured gets managed… what gets publicly reported, gets managed even better” summed up the decision made by Friends Life to begin reporting its gender pay gap as a workplace issue in 2012 and which resulted in them being the 2014 winner of the BITC Transparency Award .
A familiar phrase to the professionals who have a responsibility for management within an organisation but for many working within the payroll profession, it was a phrase that introduced us to gender pay gap reporting.
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The provision of pay data would be essential to ensure that the calculations could be done to report the:
l The average gender pay gap as a mean average l The average gender pay gap as a median average l The average bonus gender pay gap as a mean average l The average bonus gender pay gap as a median average
l The proportion of males receiving a bonus payment and proportion of females receiving a bonus payment l The proportion of males and females when divided into quartiles and ordered from lowest to highest pay.
A simple list that would require a number of separate calculations, but more concerning, data that would have been input, over the 12 months that preceded the first snapshot dates, 31 March 2017 and 5 April 2017, and in the main without the benefit of awareness, knowledge or guidance about the fact that this very same data would be called upon to form the basis for these calculations.
How easy would it be to withdraw that data when the time came, how difficult would it be to identify the relevant pay elements that would be included?
Would accuracy of data be an issue and would software be able to support employers to be able to produce accurate data ‘at the push of a button’ or would significant manual intervention be needed to identify what data was relevant and needed to be captured? The question that is always asked, when new legislation is on the horizon, who is responsible for ensuring that this obligation was fulfilled? Clearly this wasn’t a normal function required within payroll software and thus total reliance upon our payroll software to provide a standard report couldn’t be assured. This paper seeks to take a look – though the eyes of a payroll professional, as to what gender pay gap reporting would mean for them, what changes would be needed, what information needed, what team work would be developed as a result of this new obligation and of course, where would the guidance and support come from and the big question, what would the final results show?
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Background
JULY 2015 So many questions were raised throughout the consultation period which began with the publication of Closing the Gender Pay Gap which launched the consultation from the Government Equalities Office (GEO) on 14 July 2015. The CIPP held two roundtable meetings together with the Chartered Institute of Personnel and Development (CIPD) and promoted a survey to members of both Professional Bodies to ensure that views and concerns were gathered together with the constructive contributions from members who had experience of reporting the Gender Pay Gap through the voluntary initiative Think, Act, Report . This voluntary initiative had seen almost 300 employers sign up to create a ‘community of best practice’ which collectively employed over 2 million people however, and as was confirmed in February 2016 when the Government published their response to the consultation, “We said we would keep section 78 of the Equality Act 2010 under review and that is what we have done. As only seven signatories voluntarily published their gender pay gap, the government now wants to build on the progress made through the voluntary approach.” The response to the 2015 consultation saw the publication of a second consultation on the draft regulations that would be needed to deliver this mandation. It was issued on 12 February 2016 and ran until midnight on 11 March 2016. At this point consultation centred around The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 – which obliged employers within the private and voluntary sector with 250 employees as at the snapshot date of 30 April (later changed to 5 April) in any given year to begin reporting their Gender Pay Gap before 4 April 2018. It was estimated that
approximately 8,000 employers employing a total of 11 million employees would be affected by these regulations . FEBRUARY 2016 A roundtable meeting of external stakeholders representing the payroll industry was held together with representatives of GEO and an indicative subsequent timetable was shared that planned for: l the regulations to be laid by the summer of 2016 l the parliamentary process beginning in July of the same year l October 2016 being the earliest possible date the regulations would commence. This news was indeed pleasing to software developers as the need for a workable timetable had been one of the areas of concern during discussions held in July 2015 consultation as automation and technology have always been seen as an important asset to deliver gender pay gap reporting successfully. 23 JUNE 2016 On 23 June 2016 a referendum was held that saw the UK vote to end its membership of the European Union. gender pay gap reporting was among the casualties that experienced delay in their planned policy delivery as the UK Parliament responded to the outcome of the referendum. PUBLIC SECTOR EMPLOYERS – AUGUST 2016 Mandatory Gender Pay Reporting – Public Sector Employers was published on the 18 August 2016 and confirmed that as significant progress had been made towards introducing mandatory gender pay gap reporting for large private and voluntary sector employers the government believed “that it is only right that public sector employers should lead the way in promoting gender equality in the workplace.”
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Where possible it was hoped that the work carried out to introduce regulations under section 78 of the Equality Act 2010 for the private and voluntary sector would be mirrored for public bodies, to enable consistency across large organisations in all sectors. Public Sector employers already had existing obligations under the Public Sector Equality Duties (PSED). The aim was not to over burden but where possible provide consistency. Recognising that this is an area affected by devolution, it was proposed in this paper that pubic bodies subject to the Specific Duties Regulations 2011 in England who had 250 or more employees would be required to undertake gender pay gap reporting. The same snapshot date was initially proposed; by then it had changed from the initial 30 April to 5 April, but in response to feedback and in the Government response to the consultation it was announced that, in recognition of existing cut off dates for other equality duties for public sector employers “We intend to change the deadline so that all public bodies are working towards the same cut-off date’ and further ‘agree that 31 March represents a more suitable relevant date for public authorities to capture pay information for gender pay gap calculations.” When consultation began back in 2015, what we knew, and as research had previously shown, was that critical to the delivery would be the provision of clear, concise and accurate guidance delivered in a timely manner and with sufficient detail to enable software developers to ensure that their products could provide an accurate and automated solution to help employers with this latest legislative obligation. WHAT WE KNEWDURING THE ROLL OUT PERIOD
Throughout consultation and the development of regulation it had been widely believed that the power of payroll software has put us in a position to be able to gather the relevant data and be more transparent about our pay processes, without such software the very idea would have been untenable. But this is only part of the picture. Software can indeed provide the data, however the data needs to have been collected during the year (for bonus) that preceded the implementation date of this policy. Not only did no regulations exist for most of that year (2016/17) but also, and more importantly, there was no guidance and no publicity to raise awareness to the thousands of employers who would be required to react and provide the time for the resources to be developed to enable them to meet this new requirement. “Have you tested your Gender Pay Gap data in preparation for the mandatory reporting duty that comes into effect in April 2017?” Of the 825 responses received, 30% stated they had fewer than 250 employees so the duty to report did not apply (a telling number for a government hoping for voluntary reporting). Of the remaining 70%, 24% had already tested their data and 29% were planning to before April but 9% were unaware of the new duty. Given this poll ran until the middle of March, this latter figure was a poor reflection of the publicity that surrounded the delivery of this policy, but the results overall spoke well of the preparations made and importance attached to pay transparency processes by many Payroll and HR professionals. The CIPP Policy team ran a quick poll early in 2017 asking:
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Research findings summary
Our research included an electronic survey which ran from mid-February for two weeks and was open to all payroll professionals. Research also included a roundtable gathering of CIPP members and members of the wider payroll profession, who met together with representation from the Equality and Humans Rights Commission, who had recently closed their consultation Closing the gap: Enforcing the gender pay gap regulations .
This roundtable was met with the biggest response so far given to a membership roundtable with a total of 22 attendees expected to attend.
The aim was to discover what the experience of the first year had delivered, the positives, the negatives, the lessons learned and the adaptations made. Whilst recognising that it is still early days, we looked to discover what the impact or perceived impact has been to an organisation as a result of the publication of their figures.
We wanted to cover as wide a view point as possible from the many disciplines covered within the professions represented, including:
l Software development l In-house payroll professional
l Specialist payroll bureaux l Accountants or bookkeeper l Consultancy l Technical writers, training and education
The discussion points covered included guidance & education, software support, previous experience with gender pay gap reporting and communications.
The main points to come out of the roundtable discussions and the survey are covered in relevant sections that follow. The full results of the survey are available to view: CIPP survey results on Gender Pay Gap Experiences - March 2018 .
Survey respondents
OVER 50%OF RESPONDENTS ONLY GOT INVOLVED IN GENDER PAY GAP REPORTING WHEN GUIDANCE WAS PUBLISHED
n As an employer i.e. own organisations
24%
n As a payroll service provider/agent on behalf of clients
76%
n Private and
30%
voluntary sector
n Public sector
70%
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Communications
Who did respondents need to communicate with in order to gather data internally to carry out calculations and report their findings?
HR
Payroll
Finance
IT
Marketing
Senior management
0%
10% 20%
30%
40%
50%
60% 70% 80%
Others included consultants, software providers and legal department
Board members
Shareholders
Unions
Media/PR coverage
Employees
Management
0%
10% 20%
30%
40%
50%
60% 70%
80% 90% 100%
Others included board of governors, partners and councillors
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Looking ahead
As we approach the second snapshot dates 31 March 2018 and 5 April 2018, we asked respondents what they would do differently next year.
“Enter dates on bonus period in April if any paid”
“Prepare earlier”
“Create better reports to extract the data from the HR/Payroll system”
“Probably use payroll software”
“We completed a lot of additional analysis to try to understand our pay gap. Some of this analysis proved to not relate to the gap whatsoever (e.g. latest performance ratings), the data will be streamlined to focus on known issues”
“Hopefully let the payroll sort it out on a report. A lot been done manually this year”
Much work has been done this year to retrieve the correct data so many are feeling confident that the next gender pay gap reports will be less labour intensive. For year one, software has not always been able to deliver a fully automated solution and clearly there is much optimism within the profession that payroll software automation will improve the experience of reporting gender pay gap in the next year. An important area of communication continues to be needed between client and software developer.
47%
SAID THEY WOULD DO SOMETHING DIFFERENTLY IN THE SECOND YEAR OF REPORTING
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Snapshots from the viewing service
Scanning published reports reveal how diverse companies are when it comes to displaying their gender pay gap data together with the written statements and narratives but also what action companies are taking to address gender imbalance and reduce their gender pay gaps.
Acas Comparison of mean pay in Acas shows a gap in favour of men of 7.1%, against an 11% gap across the whole Civil Service. Comparison of median pay shows no gap, while across the whole Civil Service the gap is 12.7%.
Acas’ pay system covers Civil Service grades ranging from administrative to managerial level. Grades vary according to the level of responsibility that staff have. Each grade has a set pay range with pay gaps in between grades. Staff are expected to move through the pay range for their grade. The longer period of time that someone has been in a grade the more they would be expected to earn irrespective of their gender. Acas, who worked with GEO to bring us the gender pay gap guidance, is committed to fair pay irrespective of gender. Some of their initiatives include: l Support for women returning to work - through shared parental leave, job sharing, compressed hours, part-time, and term-time only opportunities. l Helping women progress in their careers - through development conversations with their line managers, development opportunities, and talent management schemes such as a ‘Step Up’ programme. l Encouraging men to take advantage of arrangements which enable them to fulfil their caring responsibilities, such as shared parental leave, part time working and compressed hours. l Monitoring pay - to identify pay differences and take targeted action where appropriate, within Civil Service pay controls. l Anonymised application process to reduce the potential for unconscious bias and ensures that all interviewers have undergone unconscious bias training. BP BP has five UK entities with at least 250 employees and they have a gender pay gap that varies across these UK businesses, ranging from –0.1% in BP Chemicals to +30.5% in BP Exploration. Their gender pay gap exists mainly because they have differing proportions of men and women at different levels in the workforce and in specific roles that attract higher pay, bonuses or allowances. BP’s written statement fully explains their data and what actions they are taking to address their gender pay gap . BP operate in an industry that relies heavily on roles requiring STEM (science, technology, engineering and mathematics) skills. For 50 years BP has been investing in STEM education – encouraging boys and girls alike to pursue these challenging and rewarding careers.
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“Our aim is for women to represent at least 25% of group leaders by 2020.”
“It is not enough though to just recruit from a more diverse talent pool. We are also aware that retention and progression of females in our workforce is an important issue and we are working with our employees to improve and implement diversity- friendly policies to enable career development in a flexible way. Our gender balance at BP is steadily improving, with women representing 34% of BP’s global population and 21% of group leaders – our most senior managers – at the end of 2017.”
Equality and Human Rights Commission Although the Equality and Human Rights Commission (EHRC) is not required to publish details of its gender pay gap as it has less than 250 employees, it led by example back in August 2017 by publishing its gender pay gap report . The results showed a buck in the trend as they revealed that women on average earn more than men and also outnumber men at senior levels. Their mean gap is 7.5% and their median, 8.2%. Private and voluntary sector employers need a senior individual to sign off on their gender pay reports. In line with the existing specific duties, this is not required from specified public authorities. The EHRC has gone over and above what would be required if they employed 250 plus employees as they also provided a written statement which explains that their figures are sensitive to any small changes in staffing at senior levels due to their relatively low number of employees.
“Publishing pay gap data should be about looking at ways to improve opportunities and pay and to guide action in organisations. It should also be seen as a way to talk about what your commitments are to diversity and inclusion and to taking action.”
Virgin Money Virgin, as a brand name, has a huge advantage over so many other businesses in that it’s a name we associate with quality and so it would take a significant bombshell for reputation to be impacted by gender pay gap results. It also sits within a sector that traditionally will return high gaps.
Virgin Money took the decision to voluntarily publish their gender pay gap results one year early in 2016 and so were in an enviable position a year later of being able to report a drop in their mean gender pay gap from 36% to 32.5%, indicating that progress is being made in redressing the imbalance. Virgin Money’s Chief Executive Jayne-Anne Gadhia has demonstrated the importance of buy-in at Board level as she has taken personal responsibility for the company achieving their target of a 50:50 gender balanced workforce (within a 10 percent tolerance) by 2020.
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The 2016 annual report highlighted the importance of addressing a number of key issues, – particularly in Financial Services:
l Encouraging a flexible culture – demonstrated by the introduction of a flexible matching recruitment policy. l Enhanced line manager capability – through the delivery of ‘unconscious bias’ training to all senior leaders to help raise awareness of the potential for personal bias and to highlight strategies to eliminate it.
A powerful step Virgin Money has also taken is that all candidate profiles are anonymised so that hiring managers make recruitment decisions based purely on skills and experience.
“We are passionate about fairness, equality and inclusion and are committed to reducing our gender pay gap.”
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Viewing service statistics
At the time of finalising this research paper more than 4,000 employers had uploaded their gender pay gap results to the gender pay gap reporting service (it has previously been estimated that in excess of 8,000 employers would need to report). 8 March 2018 was International Women’s Day which is a global day celebrating the social, economic, cultural and political achievements of women. The day also marked a call to action for accelerating gender parity and it had been rumoured that many companies would use International Women’s Day as the day to publish their gender pay gap figures. However no obvious surge was identified.
8000
7000
6000
5000
4000
3000
2000
1000
0
This gradual incline towards the end of March comes as no surprise whatsoever as employers are getting to grips with their figures and communicating them internally whilst pulling together reports and written statements. Where there is a deadline we will work to it, as HMRC can testify to each year, and with the end of the Self Assessment (SA) reporting year it sees a peak of SA submissions being made.
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Compliance and enforcement
It was certainly expected by both the EHRC and the Government Equalities Office (GEO) that many employers would publish close to the deadline. Based on presumptions of large employer behaviour as they are generally compliant, it is surprising that so many employers have not uploaded their gender pay gap data. However, given that this is the first year of reporting and in recognition of the lateness of publication of final regulations in the spring of 2017 and the publication of final employer guidance prior to the first snapshot dates; we would hope that for the first reporting year a light touch and informal approach to enforcement be taken. Certainly we are encouraged by the EHRC’s aim to ‘resolve non-compliance through informal resolution’ with the focus more on education and awareness for employers.
What will be interesting is the EHRC’s reaction (or rather action) as to the number of employers who have not reported their gender pay gap results. During their consultation they confirmed:
“Working with the GEO, we will monitor which employers have published the information required under the GPGR and the accuracy of such information, with a view to holding non-compliant employers to account.”
Given the significant number of employers that EHRC could have to hold to account and the resource involved, monitoring the information published by compliant employers will be a challenge. However, EHRC have openly stated their reservations in their ability to be able to police accurately and fully, particularly in year one.
“Prior to taking any action in relation to individual employers we will take further steps to encourage overall compliance…”
The CIPP surveyed members and the wider payroll profession with regard to enforcement in advance of submitting a written response to the EHRC consultation:
l 61% agreed that it is reasonable to prioritise enforcement action for failure to publish information in the first year
l 48% agreed that the Commission appears to have taken the right approach to escalating enforcement action but 18% disagreed
l 57% of respondents agreed with the steps the Commission is taking to encourage compliance, however, worryingly almost 40% neither agreed nor disagreed .
“Let us see what takes place in reality. Like the words but…” Comment from one respondent
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In our formal written response to the gender pay gap enforcement consultation we said:
“… very mixed messages currently exist in the media on the subject of GPGR. The very public experiences being ‘aired and shared’ do little to educate accurately the obligations that exist for employers of 250+ employees in the private, voluntary and public sectors. The Government Equalities Office and the Commission need to reclaim those headlines with educational facts so that employers can engage with this latest mandatory obligation. It also needs to recognise that for an organisation to fully and successfully engage it needs to bring together different teams across the organisation, HR, Payroll, Technology as well as obtaining engagement at Board level. We are encouraged that the policy will be reviewed regularly and would again put out a request that policing of the first year of reports i.e. with the snapshot dates of 5 April 2017 and 31 March 2017, focusses a greater educational and informal approach for all but the least compliant.
We look forward to seeing the strengthening of employer guidance that builds in lessons learned from year one experiences, together with full detail of the future compliance framework.”
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Case studies from payroll
The team leading this research, and at the CIPP roundtable, were impressed by the total commitment and engagement shown by members of the profession to this policy and to the mandation of gender pay gap reporting.
Case study 1 - private sector
“What a wonderful rollercoaster the first year has been! I started quite ‘green’, believing this would be an excellent opportunity to both influence change and sing our praises in terms of equal pay practices, but alas not quite there yet. We felt like a fair and equal employer, but this has been an educational journey, particularly the bigger picture into equality, unconscious bias, organisational management behaviours and culture. The biggest hurdle I have faced is in educating our senior board to the seriousness of this analysis and the investment required to deliver change. Let’s see what effect the ripples have once we have published, I’m sure that will drive it forwards.” This comment comes from a payroll manager working in IT in the private sector. They started looking at the gender pay gap requirements in October 2016 when guidance was first published and completed their analysis in July 2017. This revealed a gender pay gap, somewhat larger than the UK average. The analysis along with a strategic plan and recommendations were presented to line managers and board members in November 2017 but unfortunately, until recently there has been little buy in at a senior level and thus further investment. “As our gap is significant, I personally am very concerned as to the impact, particularly with our employees and our industry in general. Managing the message will be the hardest part of this exercise which we need to get absolutely right. I would like to see my recommendations for a strategic plan to be agreed so we can start influencing change where changes are needed.... without that investment I am concerned this will turn into a damage limitation exercise rather than the recruitment/retention tool we had hoped it would be originally.” It would seem that due to the media attention the hierarchy have begun to sit up and take notice. Some progress has been made, such as revising their family-related policies to make them more flexible to all employees. However the payroll manager would like to see further commitment from more of senior management in addressing their pay gap. A full equal pay audit is needed, facilitating career pathways and re-educating line-managers/recruiters etc.
Case study 2 – software development
Software developers need regulations that are finalised and that deliver the policy intent. And they need them delivered in a timely manner, for significant change such as that required with gender pay gap reporting, 18 months lead time would be the minimum required however, and as was demonstrated above, this wasn’t delivered on this occasion. Non-statutory guidance is also important in as much as it demonstrates the first interpretation by the department that owns the policy, of how they believe the regulations should be understood. The ultimate interpretation of the law occurs in the court room, but guidance at this stage is vital.
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“The use of the 12 week average for hours is a mistake in the regulations – the hours worked in the snapshot period should be used as these will match the pay in the snapshot period”
A 12th hour amendment was made within ACAS/GEO guidance that allowed for the term ‘reasonable’ as allowing for use of the actual hourly rate where a worker did not have a set working pattern (and thus an average over a 12 week period would normally be used to establish the hourly rate) and the hourly rate was known.
For workers with irregular hours the use of the 12 week average could result in a significant distortion in the hourly rate to be used.
It was too late to amend regulations but non-statutory guidance was able to be amended and we are grateful to the GEO team for understanding and responding to representations made by affected software developers.
Nevertheless Regulations need to keep abreast of real world situations – and non-statutory guidance – when Parliamentary time allows.
As this policy develops together with the development of further annual pay reporting, the GEO should develop early working relationships with software developers to ensure that products can be developed in time to support employers with data extraction, calculations and their reporting obligations.
Established forums and relationships do exist, such as HMRC Software Developer Support Team, and should be utilised to ensure that timely working and consultation with software developer’s takes place.
Further comments made include:
“Our [payroll] software outputs the raw data for each employee from which our customers can calculate the required measures. We’ve had no negative feedback about this so far. It appears that customers prefer to have the full detail so that they can see how their measures are derived and also check for anomalies in the data.”
“The regulations have the unintended consequence that employers can no longer make a payment which cannot be linked to a relevant length of time.”
Case study 3 – public sector
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The National Assembly for Wales (NAW) published a 97 page Diversity and Inclusion: Annual Report 2016-17 with an impressive list of achievements, accolades and future plans. NAW’s report includes gender break down by pay, grade, recruitment, working pattern, gender reassignment, nationality, race, ethnicity, religion/belief, sexual orientation, maternity and parental leave, disciplinary and grievance, discrimination complaints, equal pay and then gender pay gap reporting slotted in at the end. Diversity and inclusion is something that many payroll professionals have been talking to us about during the research for this paper. For many it would seem that gender pay gap reporting is just the first rung on the ladder as companies seek to be recognised as equal opportunities employers across all areas. Anecdotal evidence suggests that employers believe that they will be regulated down the diversity path in the future.
NationalAssembly forWales AssemblyCommission
Diversity and Inclusion: Annual Report 2016-17
Diversityand Inclusion: AnnualReport 2016-17
The LlywyddElin JonesAM, JoyceWatsonAMAssemblyCommissioner with responsibility forequalityandAndrewWhite,DirectorofStonewall Cymru,promoted ‘ByYourSide’,Stonewall’scampaignasking LGBT advocatesandallies topledge their commitment to continuing towork towards LGBT inclusion. WecelebratedBlackHistoryMonth inOctoberbyholdinga seriesof eventswithin theAssembly,attendedcommunityeventsandwroteblog articles inorder topromoteengagementwith theAssembly toBME people.
December2017
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www.assembly.wales
“…building upon our existing BME action plan to support and develop our current BME colleagues and also to attract and recruit people from the widest pool of talent, so that our workforce is reflective of the population it serves”
5.7% MEAN
23.3% MEDIAN
“We have pay grades with relatively short pay scales which helps to minimise the likelihood of pay discrimination occurring.”
With regard to gender pay gap the payroll manager said that NAW are:
“Looking at adjusting balance of genders in particular specialisms within the organisation”
This is not the first time NAW has prepared such a report. They have been doing these annual reports and publishing them on their website for several years - and it shows.
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GENDER PAY REPORTING
Challenges and concerns
There were many issues highlighted in comments by survey respondents; the comments chosen represent multiple concerns across these areas:
“We are concerned about the queries we may receive from clients and their expectations. Due to the gender pay gap legislation rules being so late, payroll software could only produce so much [limited] support in the early days.”
“Ordinary pay is calculated after salary sacrifices are excluded. This reduces the amount which is taken into account in the comparison. This has a greater effect on female hourly rates of pay than on male as women are more likely to take advantage of the childcare voucher salary sacrifice scheme.”
“ The guideline tells you to exclude the very people the whole thing is designed to document and then focus on helping - people on long-term leave. This removes people on maternity leave - surely the point is to include these people and any pay rise they have whilst on leave.”
“Guidance on what is reduced pay and absence needs to be clearer, especially for people on half pay.”
“Trying to work out hourly pay accurately in a boarding school environment has been extremely difficult and time consuming.”
“The media do not fully understand gender pay gap so figures are being mis-represented in news.”
“I am concerned that data at the snapshot date may not give a true picture of average hourly rates, given it included a variety of additional payments (shift allowances etc.). It also asked for on-call hours to be included, which depended on whether the individual was asleep or not. This information was impossible for us to obtain.”
“Why are bonuses included in the hourly rate on the snapshot date when they are dealt with separately over the previous 12 months? Could salary sacrifice be included if the top line salary is still used for other purposes i.e. overtime rate?”
Further to our surveys there have been many more carried out; more recently the Governance Institute ( ICSA ) have published results on a recent ‘quick question’ survey which asked Are you considering taking action following preparation of your gender pay gap report? 32% said yes closely followed by 28% who said no and 40% were undecided. However comments made confirmed concerns raised throughout our research and indeed throughout the last year ‘…it had been costly. ‘It has required additional management time and resources to compile and review the data,’ said one respondent. Another said: ‘The identification of data and the narrative to contextualise that data has been resource-intensive.’
Many respondents to this research believe the process will shame disobliging firms into reducing the pay gap. ‘Naming and shaming will drive active management of the issue,’ one respondent said. ‘What gets measured gets managed!’
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THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS
THE F IRST YEAR THROUGH THE LENS OF THE PAYROLL INDUSTRY
Devolution Political upheaval causing the delay in laying Gender Pay Gap Regulations in Northern Ireland continues to have an impact on the work of payroll – a response to our survey question asking ‘Were corrections needed to the input of raw data?’ – ‘[the] Removal of Northern Ireland Employees’.
Could gender pay gap reporting be just the tip of the reporting iceberg?
CEO pay The Government’s response to the Corporate Governance Reform green paper consultation, published in August 2017, committed to introducing a statutory requirement on all UK quoted companies to: “report annually the ratio of CEO pay to the average pay of their UK workforce, along with a narrative explaining changes to that ratio from year to year and setting the ratio in the context of pay and conditions across the wider workforce”. Equal Pay The BBC have undoubtedly claimed more than their share of the headlines in the past year to the point where gender pay gap reporting comes a poor second to the issue of Equal Pay – as we have seen and read in many examples but by far, the former China Editor C arrie Grace in her resignation letter makes clear: “This is not the gender pay gap that the BBC admits to. It is not men earning more because they do more of the jobs which pay better. It is men earning more in the same jobs or jobs of equal value. It is pay discrimination and it is illegal.” “…we are by no means the only workplace with hidden pay discrimination and the pressure for transparency is only growing. I hope rival news organisations will not use this letter as a stick with which to beat the BBC, but instead reflect on their own equality issues.”
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THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS
GENDER PAY REPORTING
Conclusions and recommendations
We acknowledge as we conclude this report that the first reporting year is yet to end and many lessons are still being learned and indeed much knowledge and learning continues on the subject of gender pay gap reporting and so in the coming months and years much will change as we see large employers respond to yet another mandatory obligation that looks to the payroll profession to be the source of data that will enable ‘accurate and timely’ reporting.
And so to attempt to conclude on such a moving beast is almost impossible but we close with a summary of our thoughts and recommendations for the future – as viewed through the lens of the payroll industry.
l We need to see the Government Equalities Office together with Equality and Human Rights Commission reclaim the headlines - Confusion remains around the difference between equal pay and gender pay gaps. This is not helped by the media sensationalising their headlines. Good guidance and information that supports all stakeholders in understanding how to comply and how to understand the implications of each together with the benefits to be gained from gender pay gap reporting as it drives greater inclusion and diversity, which will begin with the larger employer but as we have seen with good examples, the ripple impact on other employers – regardless of size – as they acknowledge that ‘it just makes good business sense to do so’. Opinions have diverged on the wider impacts of the reporting requirement. ‘Understanding what the report means is not straightforward,’ and ‘I have some concerns over the interpretation of the data as some people may try to use it to prove a point, but longer term, more openness and transparency can only be a good thing.’ l Policing of the first year of reports i.e. with the snapshot dates of 5 April 2017 and 31 March 2017, focusses a greater educational and informal approach for all but the least compliant - we repeat our request made in our formal response to the EHRC enforcement consultation. Much can be learned from other Regulators who have the mantle of education and enforcement and much can be gleaned from the largely successful rollout of Automatic Enrolment as a result of the full education portfolio delivered by The Pensions Regulator.
Enforcement by the EHRC was always a concern to payroll professionals who are accustomed to each piece of pay relevant legislation being delivered with a compliance regime clearly mapped out.
We are aware that within five years of commencement, the Secretary of State will review these regulations and publish a report on whether they meet policy objectives or impose an unnecessary burden on employers. and we look forward to being involved with that review.
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THE F IRST YEAR THROUGH THE LENS OF THE PAYROLL INDUSTRY
l Review the elements of pay and reward that can be included within the average hourly rate – significant concerns continue to be raised by potentially misleading results due to the exclusion of the value of salary sacrifice amounts – pension and childcare are the top two benefits in kind provided under salary sacrifice and indeed the value of other benefits in kind not provided through salary sacrifice can also skew the figures and provide an easy ‘out’ for employers looking to quickly reduce large gender pay gaps.
l Regulations need to be finessed to match non statutory guidance - where the average hourly rate will distort the results and the hourly rate is clearly known during the snapshot period.
l Guidance needs more examples - to ‘bring alive’ the explanations relating to calculations.
l Delay in the laying of final regulations and the production of guidance has created administrative burden and finalised lessons need to be learned from the impact.
In October 2017 the Prime Minister announced a drive to close the gender pay gap saying:
“We need to see a real step-change in the number of companies publishing their gender pay data and offering progression and flexibility for all employees. That’s why…I am calling on more businesses, both small and large, to take action to make sure the gender pay gap is eliminated once and for all.” Only the passage of time will demonstrate whether mandation at this point will actively reduce the Gender Pay Gap more efficiently and subsequently return the economic benefits to employers within the private sector, the public sector and the third sector. Many factors will need to change in order to achieve full transparency, diversity and inclusion, but what this research has shown us through survey results and in face to face interviews and discussions is that all sectors within the payroll profession have, as they do with all other new mandatory requirements, engaged wholeheartedly to ensure the successful delivery of gender pay gap reporting.
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