Gender Pay Gap Report – A Simple Guide
On the 6th April 2017 changes to Section 78 of the Equality Act made it compulsory for UK companies with more than 250 employees to publish gender pay gap figures at the end of every financial year. The gender pay gap refers to the difference between average hourly earnings of men and women as a proportion of men’s average hourly earnings.
Most UK organisations are aware that they need to complete this report, but for many what to include in the report remains a mystery. In this article we detail what payroll providers need to include in their gender pay gap report and written statements.
The Gender Pay Gap Report
The following data must be calculated and published as part of an organisation’s gender pay gap report:
- The mean gender pay gap within the organisation – this is the % difference between the mean hourly rate of pay for male full-pay relevant employees and that for female full-pay relevant employees. The mean is calculated by adding up all the hourly rates of pay (for men and women respectively), and dividing the results by the number of employees in that set;
- The median gender pay gap within the organisation – this is the % difference between the median hourly rate of pay for male full-pay relevant employees and that for female full-pay relevant employees. The median is calculated by listing all of the hourly rates in numerical order (for men and women respectively), with the average being the middle number (or in the case of an even number of hourly rates, the mean of the two middle numbers);
- The mean bonus gender pay gap within the organisation – this is the % difference between the mean bonus pay paid to male relevant employees and that paid to female relevant employees;
- The median bonus gender pay gap within the organisation – this is the % difference between the median bonus pay paid to male relevant employees and that paid to female relevant employees;
- The proportion of men who receive a bonus payment – this is calculated by dividing the total number of relevant male employees who received a bonus payment by the number of relevant male employees in total. The result is then expressed as a percentage;
- The proportion of women who receive a bonus payment – this is calculated by dividing the total number of relevant female employees who received a bonus payment by the number of relevant female employees in total. The result is then expressed as a percentage;
- The proportion of men and women in each quartile pay band – this relates to the proportions of male and female full-pay relevant employees in the lower, lower middle, upper middle and upper quartile pay bands. It is calculated by ranking all the male and female relevant employees respectively by rate of pay, and then splitting each ranked list equally into 4 quartiles. The proportion per quartile is the number of men/women in each quartile, divided by the total number of men/women.
When calculating these figures, the following definitions apply:
- Full-pay relevant employee – any employee who is employed on the snapshot date and who is paid their usual full basic pay during the relevant pay period. If employees are being paid less than their usual basic pay or nil during the relevant pay period due to being on leave, they are not deemed a ‘full pay relevant employee’.
- Relevant employees – all people employed by the employer on the snapshot date of any given year, except for partners.
The Written Statement
To confirm the accuracy of the gender pay gap calculations, the employer must also prepare a written statement, authorised by an appropriate senior person (such as a chief executive).
Having collated the data required by the regulations, the employer should then investigate the underlying causes of any descrepancy, it should set out:
- the challenges identified by the gender pay gap report, such as a gender disparity in bonuses due to higher amounts going to senior executives of a particular gender. Challenges should be prioritised with a view to reducing or eliminating gender pay gaps as quickly as possible;
- the successes identified by the gender pay gap. An example of this may be where actions taken to reduce previous gender disparities in hourly pay or bonuses have been successful;
- the plans for long term results. This will look at the specific gender inequalities that have been identified a part of the gender pay gap reporting exercise, with a view to putting short- and long-term measures in place which tackle these disparities.
Having published their findings and plan for long term results, the company should allocate the responsibility for implementation to senior management to ensure that it is properly executed, monitored, and assessed. Any policies affected by proposed actions should be updated, and key messages should be communicated to line managers, trade unions, and key employees.
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