The impact of furlough on gender pay gap reporting

Tom Heys, a gender pay gap expert at Lewis Silkin, warns that this year’s gender pay gap figures may be distorted due to new rules on the furlough scheme.

 

This year’s gender pay gap figures could be much lower than previous years, but this will be on account of the impact of furlough rather than businesses taking more meaningful action on gender inequality.

The Gender Pay Gap Information Regulations, enacted in 2017, require employers to omit from their pay-gap calculations any employees who were on reduced rates of pay on the 5 April “snapshot date”. In view of the position last April, when many people were furloughed, this could constitute a significant proportion of the workforce.

Take-up of the Government’s Coronavirus Job Retention Scheme last year was widespread , but it only covered up to 80% of pay. Unless an employer chose to top up, all furloughed workers will have to be excluded from the deadline gender pay gap figures (as well as the figures showing the proportion of each gender within each of four quartiles).
This means that April 2020 is likely to be a highly unrepresentative pay month for many employers. Since gender pay gaps are calculated from averages, the pool of people to be included could be dramatically smaller.

Take, for example, a clothes retailer with 270 women earning minimum wage working on the shop floor and 30 women in higher-earning roles in the head office. In normal times, the mean pay for women would be calculated from all 300 women and would be somewhere close to the minimum wage. But if this employer had to furlough all shop floor workers after closing its stores, the mean pay for women would be much higher because it would be calculated only from the 30 head-office workers who were not furloughed.

Only around 300 employers have so far published their data for the current reporting year, out of more than 10,000 that will be required to do so. As more reports start to appear, we should not be surprised to see many more employers announcing larger than expected reductions in their gender pay gap, particularly in mothballed industries that have had to furlough many staff during the pandemic.

Another factor is that women are more likely to have been furloughed than men, as confirmed by government data. The exclusion of a large swathe of low-paid and predominantly female workers will inevitably result in an increase in average pay for women and reportable gender pay gaps generally being smaller than previously.

The upshot is that the gaps to be reported this year could be radically different from previous years, failing to give a meaningful picture of an employer’s progress towards correcting any demographic imbalances in its organisation.

One option for employers is to consider calculating an additional set of statistics using hypothetical data for those people who were furloughed. This would help to disaggregate the (hopefully) one-off impact of furlough from the real longer-term demographic trends existing in their workplace. It would give such employers a much truer picture of their progress on reducing gender equality.

*Tom Heys is a gender pay gap reporting expert at Lewis Silkin.



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