News & Insights

Required reporting reforms?

Christian Meredith reports on a series of recommendations to improve gender pay gap reporting.

In April 2017 the Equality Act was updated to make it compulsory for companies with more than 250 employees to report on their gender pay gap statistics at the end of their financial year. This came as a result of the government launching a series of consultations and initiatives to combat the gender pay gap.

The gender pay gap is the difference between the average hourly earnings of a company’s male and female employees. It is calculated by working out the difference between the average pay of all male employees and all female employees and dividing that number by the average pay of all male employees.

Following the recent first results of the gender pay gap requirements the Business, Energy and Industrial Strategy (BEIS) Committee published a report. The report found that in some organisations the gap is as wide as 40% and called for more to be done to close the gap.

The Royal Statistical Society has also published recommendations in a bid to improve the accuracy and usefulness of how the gender pay gap is reported. The Society found the system to be “flawed in principle” and reported that numerous employers were making mistakes when submitting gender pay gap data.

A major criticism from the first cycle of results was that some companies produced statistically impossible results. One recommendation made by the Society is to ensure that online gender pay calculators have in-built ‘sanity checks’ to ensure accurate reporting and prevent these implausible entries. This could, for example, automatically question any employer seeking to report that its median female employees were earning less than £0.50 for every £1.00 earned by the median man, or vice versa. Other recommendations include improved employer guidance and improving statistical skills amongst HR professionals.

The Society also believes that reporting in pounds and pence (as opposed to a percentage) would make the reporting clearer and unambiguous. I.e. instead of stating that the “women’s median hourly rate was 20.9% lower than men’s”, the report would state “for every £1 that the median man earned, the median women earned £0.79”. This is a recommendation the government have noted and agree with, but the Society believe all reports should invariably be produced in this manner for the sake of consistency.

Although there does not appear to be an appetite for making changes to the gender pay gap reporting regime after just one full cycle of reporting, the recommendations from BEIS and the Royal Statistical Society have been acknowledged and some smaller changes have been implemented. However, any radical overhaul of how gender pay is reported is more likely to come about after the statutory review which must take place within five years of the introduction of the legislation.