Following the triggering of section 78 of the Equality Act 2010 in August 2016, the UK Government implemented the “Equality Act 2010 Regulations 2017” on the 6th April 2017. Part of the plans to reduce inequality in wages between men and women, this legislation requires all UK employers with over 250 employees to publicly report their Gender Pay Gap.
Organisations across the public and private sectors, as well as public bodies in Scotland and Wales will have to publish their first reports in 2018 and annually after that. While there are currently no sanctions as such, failure to comply with the reporting requirements amounts to a breach of the Equality Act 2010 act and leaves you open to action from the Equality and Human Rights Commission, along with possibly irreparable damage to public reputation.
It’s important to remember that if, when undertaking your analysis, you discover your organisation to have a Gender Pay Gap it doesn’t mean that you necessarily discriminate against women. Many organisations currently have a gender pay gap. How they, and you, react is key.
Defining The Gender Pay Gap
Not to be confused with equal pay, The Gender Pay Gap is a measurement of the difference between women’s and men’s pay in the UK Labour market, expressed as a comparison between the average hourly pay rates for both. The figures that organisations are now obligated to report provide a high-level indicator of women’s and men’s relative earning power within their business.
Measurement
As The Gender Pay Gap can vary depending upon the method of measurement used for the calculation, each employer is required to publish a set of numbers: The mean and median gender pay gap for hourly pay, the mean and median bonus pay gap and also the proportion of men and women in each salary quartile. Given the importance of these numbers and their indications of pay inequalities, it’s important to understand how to calculate them properly.
Mean & Median Pay Gap:
The median is the numerical value which splits the top 50% of the population from the bottom 50%. It shows the midpoint in all employees’ hourly rates of pay. Therefore, half of employees will earn a rate above the midpoint and half will earn a rate below the midpoint.
The mean (arithmetic average) is calculated by adding all employees’ rates of pay together and dividing by the total number of employees. The mean includes the lowest and highest rates of pay.
It is important to calculate separate pay gap figures for full-time and part-time employees as well as the overall population of employees. Full-time employees are those defined as working 30 or more hours, part-time workers work less than 30 hours per week (defined by the ONS).
The Gender Pay Gap should be calculated on employee’s base pay during the pay period in which the relevant snapshot date falls (5th April). As such “pay” includes basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances). It does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.
Pay Quartiles:
Employers are required to list each full-time employee’s rate of pay in ascending order, and then divide that list into four quartiles. The proportion of men and women in each quartile is then reported on.
Gender bonus gap:
This should be calculated using an employees’ bonus received in a 12-month period prior to the pay period in which the relevant snapshot date falls. Employers will need to publish the difference between the mean bonus payments paid to men and women. The mean considers the full distribution of bonuses paid by an employer. Only those employees who receive bonuses should be included in the calculation. Employers will also be required to publish the proportion of male and female employees that received a bonus.
Gender Pay Reporting Solutions
Oracle have recently released their solution to Gender Pay Gap reporting for e-business customers details of which can be found in document Gender Pay Gap Report (Doc ID 2257644.1) on My Oracle Support.
The report provided by Oracle provides an extract of two configurable balances (Ordinary Pay & Bonus) alongside a small selection of assignment and person details (Gender, Normal Hours, Grade and Frequency). None of the statutory Gender Pay calculations are performed.
We have found that for some of our clients this report is limited and doesn’t accommodate employees who do not use standard conditions or have an hourly, flexible workforce.
If the seeded solution doesn’t meet client requirements we will look to augment or replace it with the Claremont Gender Pay report that has already been developed with a number of our clients. This B.I. publisher report provides an excel output containing the source data and the required calculations to meet the legislative requirements, based upon a number of standard configurable objects that provides the necessary flexibility to meet the requirements irrespective of your payroll configuration.
If you have any queries then drop us a line or pop back here to read our analysis of the Oracle seeded solution once it is released.