The impact of gender pay gap reporting on transgender and non-binary employees

Employers with 250 employees or more are required by law to report their gender pay gap information. However, the terms ‘men’ and ‘women’ are not defined in the regulations, leaving employers to decide for themselves how to categorise and include transgender and non-binary employees in their reporting.

With a lack of any clear guidance, employers risk not only inaccurate gender pay gap reporting, but being liable for claims such as discrimination, pay inequality and victimisation.

“The legislation is silent on how employers should be addressing the gender pay gap for non-binary and transgender employees,” remarks Michelle Chance, partner and head of contentious employment at law firm Memery Crystal.

Generally, employers should use the gender identity they have on record for their employees when compiling their gender pay gap report, advises Jenny Marsden, director of services at BrightHR. “However, in some cases, the identity on file may not match how the employee self-identifies,” she adds. “This may be the case for employees who are
undertaking a gender reassignment process or for those who identify as non-binary. The regulations don’t provide any information on how employers should calculate their gender pay gap if they have non-binary employees.”

Chance adds: “Surprisingly, guidance from Acas and the Government suggests that employers may omit these individuals from the report. However, doing so would risk excluding transgender and non-binary employees – who are fighting for more visibility – from the equity pay discussion. It also puts them at greater risk of suffering from discrimination and equal pay issues.”

However, Tom Heys, gender and ethnicity pay gap reporting expert at Lewis Silkin LLP, believes the legal position is relatively straightforward.

“Only employers with 250 or more ‘relevant’ employees must report their gender pay gaps. As a non-binary person is neither male nor female, and all gender pay gap reporting calculations are about comparing female staff with male staff, they wouldn’t factor into any of these. So, if anyone identifies as anything other than one of the binary genders, they aren’t included in any of the statistics and would count only towards the employer’s headcount. Trans staff will count in whatever gender they have transitioned into; transmen are men and transwomen are women.”

As gender is self-declared for gender pay gap reporting, employers should just use what is on their systems, he adds. “Gender should be self-identified. If there are any gaps in an employer’s dataset, they should follow up with staff and ask that they provide the data. Employers should not assume someone’s gender and should instead send reminders to staff to update their diversity details on their HR system from time to time.”

Complexity

Yet Chance warns that certain situations may be ambiguous and complex. “Whilst one view may be that employees who have completed their transition or are in the process of transitioning should (with their consent) count in the figures as the gender they have transitioned into, or to which they are transitioning, it is more complex than this, as their
pay is likely to have been set by their employer on the basis of their biological gender before they started the transition process; and so to adopt this approach may distort the figures and not be a true representation of what is happening in practice.”

She adds: “It would be interesting if employers tracked salary history and salary progression information for transgender employees, both whilst they are in the process of transitioning and after they have completed their transition and to note any major differences in pay at the outset and post-transition, between male to female and female to male transgender employees.”

Heys emphasises that employers should make every effort to ensure gender pay gap reporting is done properly. “The government guidance is good, but it doesn’t cover some of the trickier issues. Employers should seek specialist help where necessary to avoid calculating and reporting inaccurate figures.”

According to a 2018 report by Crossland Solicitors, just 3% of employers have an official support system for workers wishing to disclose their transgender status; and research by Totaljobs in 2021 revealed that 65% of trans employees hide their gender identity at work, up from 52% in 2016.

It is therefore crucial that employers handle the situation sensitively so that trans and non-binary staff are not singled out or questioned about their gender; and that employers seek to create a trans-inclusive workplace where individuals feel comfortable disclosing their status and how they would like to be represented in reporting.

“From an employee relations perspective, it would be better for HR to hold individual discussions with their transgender and non-binary employees to seek their views on how they wish to be represented in their company’s gender pay gap report,” suggests Chance.

“This is a much more inclusive approach than excluding them from the report in its entirety. It may be appropriate for gender pay reports to include a separate category for non-binary employees.”

Marsden adds: “Employers can encourage staff to update their gender identity records as part of the process for compiling their gender pay gap report, but they should never question employees directly on their gender – doing so could lead to discrimination claims. Gender reassignment is a protected characteristic under the Equality Act, meaning an employee who is treated less favourably for being trans, non-binary or otherwise, could raise such discrimination claims.”

Mitigating the discrimination risk

Employers can mitigate any risk of discrimination by ensuring they are available to answer any questions that employees may have on gender pay gap reporting; updating their diversity and inclusion policies to include transgender and non-binary staff; and by providing equality training to all staff, advises Chance.

“Employers should also work to cultivate an inclusive culture by inviting employees to update their diversity information to help improve equality for all staff and assure them that it will be treated in a respectful and, where appropriate, confidential way. This will enable HR to have an accurate understanding about its employees’ protected characteristics and to report its pay gap in a way that reflects the lived experience of its employees, rather than their genders ‘on paper’.”

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