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Sweating the small stuff – proposed expansion of gender pay reporting regime

So now the House of Commons Business Energy and Industrial Strategy Committee has recommended the extension of Gender Pay Gap reporting to employers with over 50 staff, a colossal expansion from the 10,000 or so businesses caught by the current minimum 250 employees requirement. When those smaller businesses turn their attention to compliance with those Regulations, what will they find awaits them? Without in any way seeking to undermine the very worthy objectives of the GPG Regulations, here are my thoughts:-  unless they are changed to reflect the likely lesser administrative resources of those smaller organisations, all the same issues as first time around. In essence, a very substantial amount of work to produce a pay gap number which is so precisely calculated that you could use it in nuclear fission trials, but which is also effectively unchallengeable, in no sense necessarily indicative of any unlawful pay discrimination and so (at that level of precision) completely pointless;

  • some limited public squawking about the pay ratios disclosed by higher-profile small businesses. Ultimately, however, if almost everyone has a pay gap in favour of men (78% so far, according to the BEIS Report, with about 1 in 7½ having a gap in excess of 30%), the amount of political, media or activist fun which you can get out of a particular company having such a gap is pretty limited;
  • the possibility that it will be easier to identify the position of individuals within the ratios if the numbers of people concerned are much smaller. At present the minimum reporting quartile will contain 65 people, meaning that the impact of any particular individual’s pay will be fairly muted. If the quartile structure remains, however, each could contain as few as 12 or 13 people. That would make identification of the relative pay levels of individual senior people very much easier;
  • an increase in public hyperbole and the dangerous elision of a pay gap on the one hand and unlawful discrimination on the other. The Report refers to pay gaps of over 40% as “obscene and entirely unacceptable”, for example, but the reality is that such a gap in no way shows that women and men doing the same job at that employer are not paid the same too. To suggest otherwise is misleading and irresponsible, though that is of course the fiction on which the effectiveness of the GPG Regulations is based;
  • potentially a new requirement that employers publish not just the statistics but also an accompanying explanation of their gap and an action plan for closing it, against which they must report progress each year. This is not a current requirement. Most current GPG reports do include some form of narrative, though pretty much all of these say basically the same thing – this is not about discrimination, dear me no, but the distribution of men and women in the workforce, about which we are jolly concerned, really. Some go into specifics about plans to counter their gap and some do not. It seems very unlikely to me that any revised GPG Regulations could sensibly require this – how on earth could you realistically enforce and monitor the making of plans which are (a) necessarily very organisation-specific; and (b) easily knocked sideways in a small company by a couple of hires of the “wrong” gender, notwithstanding that they might clearly be the best candidates?
  • similarly, the Report’s suggestion that CEOs “should be held to account for any failure to deliver” is all very well in theory but not really viable in practice. Not only will a smaller company have a smaller number of joiners and leavers where adjustments could be made, but probably also more limited prospects for promotion and possibly for flexible working also. In addition, it could create a temptation on the part of CEOs to recruit people who were not the best candidates for a senior role merely because their salaries would chip a point or two off the pay gap. That would not only be damaging to the business, but would also be direct and unlawful discrimination against the other candidate(s). In smaller companies the GPG will probably be a great deal more volatile and it is hard to see that any proposal to sanction CEOs on that measure would attract much voter support.

There is nothing in being a sub-250 employee business which should allow you to take sex and pay discrimination less seriously than a bigger employer, and so no-one can fault the motivation behind a proposed expansion of the GPG regime. However, if the GPG idea is not to be brought into disrepute by the imbalance between employer effort required and the limited usefulness of the end result, it may be that the Government would best start by simplifying the existing Regulations and not overlaying them with realistically unenforceable obligations around explanations and plans.

© Copyright 2018 Squire Patton Boggs (US) LLP

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About this Author

David Whincup, Employment Attorney, Squires Patton Boggs Law Firm
Partner

Following ten years at a Magic Circle firm, David has been Head of our London Employment practice since 1994. His expertise gained from twenty-five years as a specialist Employment Law practitioner covers a wide variety of employment-related issues, including in particular individual and team recruitment issues, policy and contract drafting, disciplinary and grievance procedures, individual and collective redundancies, the defence of employee discrimination and dismissal claims and other litigation, whistleblowing, employee health, data protection and matters surrounding...

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