Gender Pay Gap Reporting – New Regulations

While the global gender pay gap (the GPG) is narrowing, the bad news is that the World Economic Forum (the WEF) has predicted that it will take until 2186 to close the gap – some 170 years! The Irish Government has committed to introducing gender reporting, which may be similar to the measures recently introduced in Britain.

Governments across the European Union and the US are tackling the gender gap by way of public mandatory GPG reporting, and this week the UK is following suit.

From 6 April 2017 UK employers with more than 250 employees will be required to publish annual gender pay and bonus figures online. Similar obligations are expected to come into force in Northern Ireland in June 2017.

Will the Republic of Ireland be next and, if so, what could this mean for Irish employers?

What is the Gender Pay Gap?

The GPG should not be confused with the concept of equal pay for equal work. The existence of a GPG does not necessarily mean women are not receiving equal pay. Rather the GPG is the difference in the average gross hourly pay of women compared with men in a particular organisation, such that it captures whether women are represented evenly across an organisation.

To an extent, the GPG can be explained by a variety of factors: (i) a consequence of women traditionally spending more time out of the workplace or working shorter hours; (ii) the higher likelihood of working part-time; (iii) the greater possibility of being employed in lower-paying sectors; (iv) generally experiencing slower pay progression; and (iv) ultimately not taking on more senior management roles.

Why close the Gap?

Ultimately closing the GPG will help create a more equal and cohesive society. Furthermore the virtues of gender diversity in the workplace – and in the boardroom in particular - have been well documented. However, closing the gap is not just good for politics and social justice, but good for the economy too.

Despite initial appearances, the GPG is not simply a "female" issue – it is a family issue. It ultimately affects both men and women, in particular when reviewing their collective take-home pay. The February 2017 PwC Women in Work Index reported that closing the GPG in the UK could increase female earnings by £85 billion.

What is happening in the US?

According to a 2016 study by PayScale Human Capital, women in the United States make 76 cents for every dollar that their male counterpart makes.

Last September, the US Employment Opportunity Commission (EEOC) announced a review of its reporting requirements. From March 2018, all employers with 100+ employees who currently submit the EEO-1 Report (compliance survey), will have to provide additional data on employee pay, including by gender, race and ethnicity. The data collected through this report will encompass more than 63 million workers across the United States and is expected to significantly improve investigations of possible pay discrimination.

What is happening in the UK?

On 6 April 2017, in an effort to close the 19.1%, UK gap, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the "UK Regulations"), will come into force. They will require private and voluntary sector employers with 250+ employees to publish details of their GPG information for 'relevant employees' annually. Calculations are made using both the mean and median average hourly pay across four tailored pay bands. Employers in scope will also have to address their gender bonus gap. All of this information must be published on the employer's own website for 3 years, in addition to being uploaded to a government website.

However, the UK Regulations are, for now, essentially toothless. There is no provision for enforcement or sanctions for non-compliance. Rather employers will only be deterred by the prospect of being "named and shamed" with the potential knock-on effect for recruitment and retention of female employees, as well as the risk of reputational damage among customers.

What's happening in Northern Ireland?

The NI Employment Act 2016 introduces a GPG reporting obligation for employers with 250+ employees – it is expected to come into force in June 2017. However, one key difference to the UK regulations is that it is anticipated that the NI Regulations will have significant bite - employers could face fines of up to £5,000 per employee for breach of the reporting obligation.

What's happening in Ireland?

According to Eurostat statistics, the average GPG in Ireland is 16%. Ireland is ranked 6th overall in the WEF Report, well ahead of the UK ranking of 20th and the US ranking of 44th and the PwC Index has predicted that Ireland will close its GPG by 2032. This begs the question of whether Ireland really needs mandatory GPG reporting at all. Ireland might instead look north to Iceland, the best country in the world for gender equality with a government agenda to eliminate its GPG by 2022 – despite its lack of mandatory GPG reporting.

However, despite Ireland's favourable ranking in the WEF report, Ireland's GPG has actually been increasing in recent years and is 6.5% greater than it was in 2012. So which direction is Ireland heading?

Apart from the UK and the US, Ireland will likely look to its fellow EU member states who, in line with the European Commission's declared commitment to closing the GPG, have already taken steps towards mandatory GPG reporting. Austria, France and Belgium already require equal pay reports and annual gender pay action plans to be published.

Ireland's current Programme for Government expresses commitment to "promote wage transparency by requiring companies of 50 or more to complete a wage survey". Building on this commitment, the Labour Party published the Irish Human Rights and Equality Commission (Gender Pay Gap Information) Bill 2017 in March 2017. Under this, the Commission can put in place a "scheme" to require employers with 50+ employees to regularly report on their GPG. While the ultimate shape and form of what such a "scheme" could look like remains to be seen, significantly the Bill makes provision for any contravention to constitute an offence attracting a Class A fine. Although in its infancy, Ireland's approach to GPG reporting will likely include the bite that is currently lacking in the UK Regulations. 

To close the gap, the Irish Government will also need a greater focus on cancelling out the "motherhood penalty" by supporting women in their return to the workplace through more affordable childcare, expanding the concept of shared parental leave, as well as encouraging employers to facilitate more flexible working arrangements.

What does this mean for Irish employers?

Irish employers have a unique opportunity to take steps to get their house in order early and identify and rectify disparities in advance of such reporting obligations coming into law.

Irish employers have the chance to gather and analyse their payroll data, as well as review their existing HR polices and compensation practices, to ascertain whether there is any unintentional gender bias before there is a reporting requirement. Undertaking such a review allows employer to diffuse any equal pay or discrimination issues before they hit, by either taking corrective action or exploring any disparity to establish whether it can be justified. On a positive note, where there is little or no GPG, employers could use this data proactively to perhaps voluntarily publish this information and attract invaluable good PR.

If (likely when!) mandatory reporting comes into play in Ireland, the publication of data that shows up a significant GPG may lead to internal employee grievances and claims for discrimination or equal pay. Furthermore, in today's pro-diversity society, being associated with such negative data may threaten an employer's brand, placing it at a competitive disadvantage in the market place.

The collation of such data raises other considerations, such as data protection and confidentiality, as well as the very real possibility that the output of such a review may be disclosable in legal proceedings. In addition, the financial cost of undertaking such a preliminary review and rectifying any disparities could be significant. However, prudent employers would be well advised to consider such a trial run as a once-off investment for a long term gain. Furthermore, engaging a suitable legal advisor in respect of the review may ensure that the work product of this pilot assessment, and any advices in respect of addressing gaps before they result in legal claims, can be protected by legal privilege.

While the concept of GPG reporting hasn’t yet got off the blocks from an Irish law perspective, closing the gap is clearly on the government's agenda. As mandatory GPG reporting has been identified at an international level as the next step towards bridging the gap sooner rather than later, it seems inevitable that Ireland will follow suit.

For more information in relation to this topic, please contact Ailbhe Dennehy, Associate, or any member of the A&L Goodbody Employment Team. 

Date Published: 6 April 2017