Pay reporting

The government has recently produced guidance on gender pay reporting, which is mandatory for some employers and also guidance on ethnicity pay gap reporting, which is not mandatory.

The gender pay gap is the difference between the average pay of men and women in an organisation. Any employer with 250 or more employees on a specific date each year must report their gender pay gap data. Failing to report gender pay gap data by the deadline is unlawful.

The gender pay gap and equal pay both deal with pay disparity at work, but they are not the same. Equal pay means that men and women performing equal work, or work of equal value, must receive equal pay. Equal pay has been a legal requirement for decades and is currently covered by the Equality Act 2010.

It applies to salary and all contractual terms and conditions of employment, such as:

• holiday entitlement
• bonuses
• pay and reward schemes
• pension payments.

The gender pay gap measures the difference between men and women's average earnings in an organisation. It does not take into account people's roles or seniority.

An employer with an effective equal pay policy can still have a gender pay gap. For example, this can happen if the majority of women are in lower-paid jobs.

A pay gap is not the same as unequal pay. Unequal pay means that employees performing equal work, or work of equal value, are not receiving equal pay. It is unlawful to discriminate both directly and indirectly against employees and people seeking work because of their race, including ethnicity. This includes paying an employee less or giving them terms and conditions, which put them at a disadvantage because of their race.

An ethnicity pay gap is a measure of the difference between ethnic groups' average earnings across an organisation or the labour market as a whole over a period of time, regardless of role or seniority. It is not a like-for-like comparison of employees of different ethnicities. Even if an employer has a fair pay and reward policy, and even if it has equal pay, it could still have a pay gap.

Ethnicity pay reporting is, however, much more complex than gender pay reporting. While gender pay analysis only involves a comparison between two groups, ethnicity pay analysis can potentially involve many more ethnic groups, depending on how ethnically diverse a workforce is.

Unlike gender pay reporting, employers may also have to make decisions about how best to combine different ethnic groups to ensure their results are reliable and statistically sound and to protect confidentiality. This recent guidance published by the government provides high-level advice on how to approach balancing reliability and confidentiality. Where possible, the approach and the calculations should be checked with analysts.

Employers must ensure that they are complying with the gender pay gap reporting requirements and may wish to use the processes in place to support the introduction of ethnicity pay gap reporting.

To discuss this or any other employment matter, contact us.