As of April 2018, organisations with over 250 employees are required to submit an annual statement which outlines the median hourly earnings rates for men and women. As widely reported, the findings of the 2018 submissions highlighted a gender pay gap across the UK economy that is 18% in favour of men. In response, the House of Commons’ Business, Energy and Industrial Strategy (BEIS) Committee has conducted an inquiry into the effectiveness of this current system, commenting on an ‘obscene’ and ‘unacceptable’ gender pay gap that, in some organisations, reaches as high as 40%.
Whilst the Committee identifies that the current system has helped to ‘shine a light’ on the severity of the gender pay gap, it concludes that this transparency can only be the first step taken in addressing this issue, recommending:
- Annual reporting requirements be extended to companies with 50 or more employees, with statistics suggesting that gender pay disparities are significant in these areas.
- A mandatory requirement that all reports submitted include a narrative explanation for any pay disparity alongside an action plan to tackle this.
- The Equalities and Human Rights Commission be granted specific enforcement powers that would allow them to levy fines for non-compliance with the reporting system.
- The Government alters reporting requirements to include partner remuneration alongside improving quality of the guidance on calculating the figures to ensure the highest earners’ data is captured.
Speaking on the findings of the report, Rachel Reeves MP, Chair of the Committee, argues that addressing the gender pay gap is necessary not only for fairness but also for improving the overall economic performance of the UK. She outlines that Chief Executives should therefore have clear targets for implementing changes in their organisations and should be ‘held to account for any failure to deliver.’
Although it remains to be seen if any of the recommendations will be considered by the Government, it is looking increasingly likely that the reporting thresholds may be lowered to include organisations with a minimum of 50 employees. Employers should therefore take steps to evaluate if there is a clear evidence of a gender pay gap within their workforce. If it is found that this is the case, they would be wise to consider exploring incentives that encourage promising female employees to progress to senior roles.
The Committee is also expected to conduct a second inquiry into reforms relating to executive pay levels and structure, which shall be released in autumn 2018.