Gender Pay Gap Reporting, what does it mean for you?

From April 2017, Gender Pay Gap Reporting (GPG) will become mandatory for all employers with 250 employees or more. What does this mean for you?

If you’ve got more than 250 employees you will have to make the following details public:

1. The percentage difference between male and female pay on a mean and median basis;
2. The percentage difference in bonus paid to men and women on a mean and median basis, and what proportion of the male and female workforce are paid a bonus; and
3. Exactly how many men and women sit in each pay quartile within the organisation.

My advice is: don’t be tempted to view the new obligation as just another job for the human resources team. Gender pay gap reporting has much wider implications for your business, affecting recruitment practices, remuneration polices, employee relations, talent retention and public reputation.

A bad PR day

GPG is a positive thing. We should all be more transparent in issues that affect equality in the workplace, and GPG is a really important step towards this. However, it’s clear that a high gender pay gap is likely to negatively impact your reputation.

If you report a high gender pay gap, for example, you could be seen as less than fully committed to fair pay, promotion and development opportunities for women. Internally, it will affect staff morale. This will have a knock-on effect, and could make your organisation less attractive as employers, undermine your ability to recruit and could also have a negative impact on how your brand is seen in the wider market place.

While a large gender pay gap may indicate wider issues around equality of pay in your organisation, it doesn’t necessarily mean you are acting in a way that is contrary to the Equal Pay Act. Despite your best efforts to be an inclusive employer, you could have a large gender pay gap for reasons largely beyond your control. How you tell this story is important, and you’ll need a good internal and external communications plan in place to ensure staff are communicated with sensitively, and that reputational damage is minimised.

Time is of the essence

So the stakes are high, and, for some organisations, the process of preparing a gender pay gap report could reveal some sobering truths. Time is of the essence. If you start preparing for your first gender pay gap report early, you will have the opportunity to address any issues raised before publically disclosing your gender pay gap. Those leaving preparations too late will find themselves addressing these issues in the public domain, under the watchful eye of the media, trade unions, their employees and their customers.

In short, if your organisation wants to use mandatory gender pay gap reporting to understand, improve and even showcase your success in providing fair development and promotion opportunities for men and women, the time to start planning your strategy is now. It’s likely that it will take up to twelve months to become familiar with the proposed reporting requirements.

When is the deadline?

April 2018 is the deadline for publishing your first gender pay gap report, but you can publish much earlier if you want. When to publish will be a strategic decision for your organisation and will depend on factors such as brand reputation management, media influence, and your remuneration and reporting cycles.

Help! What do we need to do to ensure compliance?

You might find these five steps helpful to ensure compliance. They should help you pinpoint any issues you need to address before you publish your first report.

Step 1: Get your reporting systems in place

As mentioned, in order to comply with gender pay gap reporting, your organisation must report on three key areas:

1. the percentage difference in male and female pay on a mean and median basis
2. the percentage difference in bonus paid to men and women on a mean and median basis, and what proportion of the male and female workforce are paid a bonus
3. what proportion of men and women sit in each pay quartile (the quartiles should reflect the overall pay range of your business based on the gross hourly rate of pay and each quartile will contain an equal number of employees).

Your gender pay data must be based on a gross hourly rate, calculated by dividing weekly pay by weekly basic paid hours. So the first challenge is to make sure your systems can identify the number of hours each employee works. This may sound simple, but not all payroll systems record hours worked automatically.

Step 2: Understand how to make your calculations

To calculate your organisation’s gender pay gap, you need to be clear on a range of factors:

• which elements of pay and bonus are covered by the gender pay gap reporting requirement
• which employees, including contractors, agency workers and casual workers, are covered
• what period you need to draw pay and bonus data from
• how to calculate the gross hourly rate with your existing systems, given the number of variables to be considered
• what the implications for ‘group’ organisations are, and how to report gender pay gap data in the context of a group or individual entities within the group.

You should also be aware that pay and bonuses are calculated differently, and across different time periods.

Step 3: Perform a trial run

The next step is to carry out a trial run of your gender pay gap report. This helps in two ways. First, it lets you check that your systems and processes are ready to report in a way that is compliant with the new reporting requirement. Second, it provides you with an early and private snapshot of the current gender pay gap in your organisation.

A trial run can provide you with reassurance that the people whose job is to produce the data for gender pay gap reporting are trained and familiar with the processes, and that the processes are adequate to deliver the report. It can also pick up any issues with the infrastructure behind this process. For example, if you discover you need new software or hardware (such as time recording devices), finding this out early will give you time to complete what may be a lengthy IT and procurement process.

The other important advantage of performing a trial run is that it lets you identify precisely what, if any, disparities in pay exist within the business. Our experience is that many organisations are either unaware that they have a gender pay gap or, if they know they have one, that they underestimate it.

Step 4: Look at the underlying issues

You need to look into exactly where and why a gender pay gap exists. Some of the most common areas to consider include:

• Recruitment practices
• Salary negotiations
• Bonus awards
• Promotion decisions
• Support for returners
• Options for flexible working
• Organisational culture

Understanding the reasons for your gender pay gap as early as possible gives you time to work out how to explain them internally and externally (if the reasons are fair and valid). You might need to take professional advice on how to address the reasons for the gap, and to take action before your first gender pay gap report.

Step 5: Get ready to publish your report

The legislation requires you to report your gender pay gap data in two ways:

• Directly to a government department, which will make the report available to the public and collate a league table to enable businesses and employees to compare the results
• On your own website, in an area that is easy to find. There’s no strict definition of what this means, but I suggest making your GPG data accessible from the home page. You must leave your report on your site for at least three years.

A director or employee at a similar level must sign off the data behind your report. There’s no requirement in the legislation for a narrative (the story that your communications plan will address) to support your data, but my recommendation is to include one. This narrative will be a key part of your gender pay gap reporting strategy.

Who to involve?

Gender pay gap reporting presents a wide range of challenges and many fall well beyond the typical remit of the human resources manager or director. These challenges will need input and support from across an organisation, so it’s vital to get stakeholders on board early and make sure they are fully aware of the challenges.

About the author

Andrew Craig leads KPMG’s People Consulting team in the South West.