The Government Takes Steps to Close the Gender Pay Gap

Consultation began on 14th July 2015 on proposals for legislation to be enacted in the first half of 2016 requiring Companies with more than 250 employees to carry out a review of gender pay differences and publish the results.

The overall UK gender pay gap of 19.1% shows that a woman, on average, earns around 80p for every £1 earned by a man. The Equality Act of 1970 made it unlawful to pay men and women differently for doing the same job.  The gender pay gap described above does not therefore indicate unequal pay, but rather shows the difference between the average earnings of men and women.

The underlying reasons for the gender pay gap are complex, but the government has commented that closing this gap is the right thing to do and will also improve national productivity and help the economy.

The government was given power by the 2010 Equality Act (Section 78) to make regulations requiring mandatory gender pay reporting. This power has not so far been exercised and a voluntary approach to reporting has been adopted. However, it was  revealed in March that only five large companies have so far published details of their gender pay gap and the government is now pressing ahead to put in place measures for mandatory reporting.

With increased transparency comes significant risk for companies who publish adverse results of a gender pay review. The release of sensitive financial information could lead to negative publicity and reputational damage. This could, in turn, impact on a company’s future ability to attract, retain and motivate employees. There are also potentially serious financial consequences resulting from successful claims for unequal pay arising from the information in contained in these the reports.

Some companies may even be unaware of any gender pay gap existing within their organisation. However, proactive employers are taking the opportunity to investigate this situation and where necessary take action to close the gender pay gap before the new legislation comes into effect.

The consultation period will last until 6th September 2015 and topics for consideration are what should be reported, how the information should be made available and when the legislation should take effect.