In the wake of the Gender Pay Gap Regulations 2017 and widespread media coverage of the first gender pay gap reports, employers are under greater pressure to increase pay transparency.
Some organisations, including the big four accountancy firms, have chosen to go beyond the formal requirements of the regulations by disclosing ethnicity pay gap data alongside mandated gender pay gap data. Others have disclosed gender pay gap information for senior staff who do not technically need to be included within reports. Some employers with fewer than 250 staff are also choosing to prepare and voluntarily disclose gender pay gap data.
These actions reflect a desire to demonstrate commitment to pay equality in various forms, particularly to millennials, who increasingly expect pay transparency from employers. It also anticipates a possible extension of the regulations to smaller employers, which the EHRC and the BEIS Parliamentary Committee have called for.
New pay reporting requirements, coming into force in January 2019, will require quoted companies with more than 250 UK employees to include pay ratio tables in directors’ remuneration reports. These will show chief executive officer pay as a ratio of that of full time equivalent UK employees, ultimately over a 10-year period. The government expects that this will encourage boards to explain to shareholders and other stakeholders, such as employees, why its pay ratio is appropriate, and to allow shareholders to judge whether executive pay is proportionate and reasonable.
So, what actions should employers be taking? First, they should prepare 2018 gender pay gap reports now to identify any patterns and whether any improvements have been made on the previous year’s position. Employers should also consider whether any additional messaging is required to contextualise disclosures in the face of increasing scrutiny from the media and employees. Finally, organisations should consider disclosing data beyond the strict requirements of the regulations.
Anvita Sharma is an associate in the employment practice at Hogan Lovells