With the UK lagging in 76th place in the “Global Talent Competitiveness Index” for gender earnings, and 2015 statistics showing a gender pay gap of 19.2 per cent in favour of men, Theresa May has a window of opportunity to improve the UK’s position during her time as prime minister. However, there are major concerns that the new obligations do not go far in enough and may allow employers to shirk their duty to address pay issues.
The new regulations require only the disclosure of gender pay and bonus gaps. Somewhat surprisingly, there is no requirement for employers to take remedial action in relation to any gender pay gap identified, nor is there provision for enforcement of the disclosure requirements or penalties for non-compliance. So whilst the new regime is undoubtedly an encouraging development, the obligations imposed on UK employers are minimal when compared to gender pay regimes in other European countries.
By way of example, employers in Belgium are required to outline details of the gender pay gap in annual audit, which is transmitted to the national bank and made publicly available. Additionally, Belgian firms with over 50 workers must analyse wage structures every two years and produce action plans for combatting any gender pay gap that is identified.
Swedish companies with just 24 or more employees are required to produce an action plan for equal pay every three years, which should include information on gender pay gaps within pay grades and detail proposals for remedying issues. Similarly, the Finnish Equality Act requires employers of 30 or more individuals to share an equality plan, containing a pay survey and gender pay gaps within job roles and pay grades, with the workforce every other year.
Finally, in France employers with more than 50 employees have been required to conduct annual gender pay analysis and produce action plans for addressing differences in pay since 2010. Although this requirement was initially unenforceable, subsequent legislative changes have allowed the French government to impose fines of up to one per cent of a non-compliant employer’s total wage bill.
Against this European backdrop, it is arguable that there are major shortcomings in the UK gender pay requirements, which may drastically limit any impact. Perhaps most obviously, the minimum employee threshold for compulsory action is comparatively high in the UK, automatically narrowing the scope of the regulations. Furthermore, UK employers identifying pay issues have no subsequent responsibility to address those gaps. Unlike many other nations, there will be no obligation in the UK for organisations to produce a gender pay action plan or take any other remedial steps in respect of pay inequalities unearthed by a review.
There is also a real risk that the lack of enforce mechanism in the regulations will lead to UK employers taking a pragmatic approach to compliance. Given the absence of penalties for non-compliance, employers may choose this option over the risks of publicly disclosing sensitive employee pay information. In comparison to the government’s previous approach to gender pay, which focussed on voluntary disclosure by employers, the new regime represents progress in relation to equality and diversity.
However, a half-baked approach could see us languishing even further behind European counterparts and, with Brexit looming, gender pay is surely one area where May should endeavour to remain in touch with the rest of Europe.
Ed Stacey is partner and head of employment Law at PwC.
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