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How to tackle the trickiest parts of gender pay gap reporting

The majority of employers that are required to report their gender pay gap have yet to upload their figures. One explanation could be that reporting your gender pay gap is not as straight forward as you might think. 

In our experience, there are five tricky areas in particular that organisations will need to get to grips with.

The distinction between "employees" and "relevant employees"

Companies with 250 or more "employees" must report on their gender pay gap. For gender pay gap purposes, "employee" is a broader definition than usual. It means anyone employed under a contract of service, a contract of apprenticeship or a contract personally to do work. This includes employees, casual workers, partners, salaried partners and LLP members (where they would usually be treated as employees, for example, for payroll purposes). 

Once you have worked out if your company meets the 250 threshold, a narrower definition of "relevant employee" is used to decide whose pay must be included when calculating the gender pay gap. A "relevant employee" is an employee employed by the company on the snapshot date (5 April), with the exception of partners (including LLP members). 

Should contractors be included?

Contractors who are directly engaged by the employer (rather than through a personal service company) will count for both headcount and reporting purposes where they are personally obliged to do work for and under the direction of another person. 

Whereas records for remuneration and working time for conventional employees are generally stored in the employer's payroll or HR systems, this will often not be the case for contractors.

There is an exclusion from reporting on contractors where the employer does not have the relevant data and it is not reasonably practicable for them to obtain this. However, ACAS guidance suggests that companies should try to proactively obtain the necessary information from their contractor population to enable them to comply with their reporting obligations.

What about overseas employees?

The general rule is that overseas employees will be included if they could bring a claim to an employment tribunal in the UK under the Equality Act 2010. This will depend on whether the employment relationship suggests a stronger connection to British employment law than anywhere else. Applying this test has the potential to be particularly onerous for employers with a large overseas workforce.

If currency needs to be converted in order to carry out relevant gender pay calculations, then the employer should use the exchange rate that applied at the date of payment, adding further complication to reporting on overseas employees.

Employees on reduced pay

Employees who are being paid at a reduced rate or nil as a result of being on leave (including sick leave and maternity leave) on 5 April will count towards the 250 threshold but should be excluded from the calculations for the gender pay gap and the quartile data. However, they must be taken into account in the calculation of the gender bonus gap.

How should we present our gender pay gap?

Employers should think carefully about where and how to communicate their gender pay gap internally and externally. It is important to consider the wider implications, including how the company proposes to close the gap, the commitments it will make to its employees, how it will deal with any reputational issues and the potential impact on recruitment and retention. 

A gender pay gap is not the same as an equal pay issue; the latter is characterised by men and women being paid unequally for equal work. However, given that most employers are likely to have a gender pay gap, simply posting the figures on the company’s intranet and website without any explanation could generate some disquiet and prompt claims of unequal pay. A more targeted approach to communication will go some way to avoid this. 

While there is no obligation to provide a narrative, it is particularly important where a company has reported a gender pay gap as it presents an opportunity to explain any gaps, provide context and demonstrate how the company is proposing to address any issues. A carefully drafted and tailored narrative could help to curb both internal and external criticism.

This article was first published by People Management


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