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On International Women’s Day, the Labour shadow minister for women and equalities announced a Labour government would take strict enforcement action against employers who fail to close gender pay gaps.
In 2017, the requirement for companies with 250 employees to calculate and report their gender pay gap was introduced. The deadline to publish reports is fast-approaching, with private companies having to upload their results to their own website and a public governmental website by 4th April 2018. Alongside the required calculations, employers are encouraged to produce a voluntary narrative which outlines additional information, such as the reasons why any pay gap exists and whether the business will take any steps to reduce the gap.
Although the requirement is aimed at increasing transparency regarding pay practices in businesses, and it is hoped doing so will cause public and internal pressure to correct the gap, there are no specific enforcement or penalty powers contained in the legislation which require employers to take action to close the gap.
Labour have argued the requirements don’t go far enough as they only require employers to audit their pay gap and not take any formal action. The shadow minister for women and equalities has announced a Labour government would introduce a policy where reporting companies will be required to set out the specific action they will take over a set period to close the gender pay gap in their business. A failure to close the gap would then lead to additional auditing requirements and potential penalty fines.
This policy looks similar to a new proposal recently outlined by the French government where French companies will have a period of three years to address unjustifiable gender pay gap, such as unequal pay – different pay for doing a job of similar value – following a warning or they will face a fine of up to 1% of their wage bill. It is expected this will be in force by 2020 if the proposal is passed by parliament.
There aren’t many details on the Labour policy yet and they have said they will consult on the policy. Given the reasons for gender pay gaps are complex, it is likely putting in positive steps to try and address gender pay gaps, such as recruitment initiatives and outreach, would be sufficient even if the gap doesn’t actually close because they will be taking some action. To address a lack of qualifications within a particular gender taking action, for example, could include putting in an apprenticeship scheme, running a training programme or upskilling current employees to fill the roles.
The continued focus on this area shows how important it is for businesses to take positive action where their reports show the existence of a gender pay gap. A positive use of the voluntary narrative will help put employees’ minds at rest that there are no discriminatory factors present and will also help matters such as engagement and retention where the employer sets out action they will take.
It is important to note the reporting requirement does not end on the 4th April 2018. It is an ongoing requirement for large employers and they will have to take the next ‘snapshot’ of pay data on the 5th April 2018 to produce their second report by next April. These annual reports can then be used to monitor whether the employer is taking positive action to help reduce, or remove, the gender pay gap.
*Kate Palmer is Head of Advisory at HR consultancy Peninsula.