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Gender pay gap reporting

Guest blog by Rachel Bowden CMIIA QIAL CIA | 28 August 2018

The end of March 2018 saw significant media focus on gender pay gap reporting as employers in the UK rushed to meet the first reporting deadline. For those companies that reported early, there was a risk of additional media scrutiny, but some organisations missed the deadline. In April 2018 the Equality and Human Rights Commission (EHRC) started enforcement action against more than 1,400 organisations which had not met the deadline. In the latest comment on its website EHRC reports that under 400 organisations’ reports were still outstanding in May 2018.

With the first reporting deadline passed, there is now data for 10,717 employers on the government website (as at 22 August 2018), including data from 296 employers with fewer than 250 employees (who have therefore apparently reported voluntarily).

The results make for interesting reading. Users can search by company name, the number of employees and the sector of the employer. This data should also be a valuable source of benchmarking data for boards and human resource departments to use to compare themselves with peers. It may also be a useful reference point for internal auditors when considering the level of assurance they may need to provide in readiness for the next reporting deadline.

To clarify, the gender pay gap is the difference in average pay between the men and women in your workforce. It is different to equal pay, which means you must pay men and women the same for equal or similar work.

There are several areas where internal auditors can provide advice, assurance or play the role of devil’s advocate (or corporate conscience). Now is a good time to provide such input while there are several months before the next reporting deadline. Of course, reporting and compliance with legislation is one core focus, but there is also a need for internal auditors to look at how gender pay action plans, work force and talent development plans and human resource strategies all align; after all, if gender pay gap reporting is treated solely as an annual compliance task rather than as part of the information that informs the company’s people strategy then gender pay gaps will remain.

Questions for internal auditors to ask

Here are a few questions that internal auditors should be asking to check that these are being addressed somewhere in the business.

Communication and reputation

How are plans being developed to meet the 2019 reporting dates?
Is there a plan to ensure that data is being collated, quality assured, and that accompanying narrative is written and approved at an appropriate level?
How quickly is the business reviewing data to the 2018 snapshot date, ready for reporting in March/April 2019?
How did people within the business react to the organisation’s gender pay gap? What messages were given (for example focusing on encouraging more women into management roles) and how is the organisation progressing in actioning these messages?

Data quality and process

If there were lessons learned from the collation of last year’s data, how have these been applied?
Are the same assumptions being made when collating data, if not, are these reasonable and can they be explained?
As an internal audit team, have you accessed the government site to review how your organisation’s data looks alongside others? Does this stack up with your knowledge and available data relating to pay in the business? Is your employer one of the 316 who have not reported the number of employees and, if so, do you know why they have not reported?

Governance

What information is available at board level aligned to gender pay gap reporting? Is gender pay gap reporting seen as a one-off annual task? Do human resource strategies or similar seek to address gender pay and representation of genders across different parts of the company hierarchy?
Is this something that will be on the board agenda before March 2019 or is this being treated as a last-minute reporting requirement?

Benchmarking

What analyses have been undertaken to compare with peers, competitors and similar businesses?
What can be learned from others, in terms of insight into competitor/peer data or how they have reported narratively on the subject?

Action planning and strategy

Much of the above may be captured in action plans or actions agreed with the board or within a human resources strategy. Is progress being made as intended, in particular those actions communicated to staff or externally? How are these built into strategies in areas such as work force development, talent and recruitment?

Lastly, if your employer was not large enough to fall under the regulations last year – has growth meant that it will have to report in Spring 2019 (or could its growth bring it in line in subsequent years?)

A quick reminder about the reporting requirements

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 stipulates that private companies and voluntary organisations with 250 employees or more (at a snapshot date of 5 April), in England, Scotland and Wales, are legally required to report on their organisation’s gender wage gap.

For the public sector, under The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017, those with 250 employees at a snapshot date of 31 March are required to report.

For the purposes of reporting, an employee is defined under Section 83 of The Equality Act 2010, which definition includes apprentices and contract workers. This could mean self-employed contractors are included, but generally agency workers would be excluded.

Organisations are required to report the following figures:

Gender pay gap (mean and median)
Gender bonus gap (mean and median)
Proportion of men and women receiving bonuses
Proportion of men and women in each quartile of the organisation’s pay structure

The organisation should complete a written statement confirming that the calculations are accurate. This must be signed by an appropriate senior person such as the Chief Executive or Human Resources Director.