Gender pay gap requirements came into force April 2017.
It is a new measurement, and one not to be confused with Equal Pay Act (1970) which ensures that men and women receive equal pay for the same work.
The gender pay gap is different in that it measures the disparity between an organisation’s total pay paid to men and it’s total pay paid to women. The public sector has been reporting this information for some time. The private and voluntary sector now has a duty to do the same.
In this brief and broad outline of the requirement we outline the duty and calculations needed to meet the gender pay gap requirement.
Organisations that employ 250 or more employees (headcount, not full-time equivalent) are required to collect and publish the data for gender pay gap identification on the snapshot date. The data to be published must show mean and median pay averages, divided into annual salary quartiles.
The snapshot date is the day on which the data is to be collected. For the private and voluntary sector that date is 5 April. It is recommended that for organisations whose staff numbers fluctuate around 250 employees that they collect and report the data annually.
For every relevant employee, the minimum information to be collected is:
Ordinary pay and the length of time covered. Ordinary pay excludes:
- overtime pay
- redundancy pay
- pay in lieu of leave
- benefits in kind and salary sacrifice amounts
- pay from a different pay period)
Bonus pay and the length of time covered. Bonus pay includes:
- options or interests in securities
- remuneration that relates to profit sharing, productivity, performance, incentive or commission)
The regulations specify how to calculate the hourly rate of pay. They also specify that:
- a month has 30.44 days
- a year has 365.25 days
Gender pay gap
To calculate the gender pay gap for men, and the gender pay gap for women follow the steps below.
To calculate the (arithmetic) mean
- Identify the total amount of ordinary pay in the relevant pay period. (Using simple numbers for easy illustration)
- £1,500 per month for 37.5 hour week
Identify the total bonus pay in the relevant pay period. (Again, using a simple number)
- £1,000 per month
Add the two amounts together
- £2,500 per month
Pro-rate that total pay to weekly or monthly pay
- £2,500 / 30.44 x 7 = £574.90
Divide the amount by the number of working hours in the week
- £574.90 / 37.5 = £15.33
Perform this calculation for both total male pay and total female pay to work out the hourly rate for each gender.
To calculate the median (middle value in a data set when items arranged in numerical order lowest to highest)
For example, using the following numbers for simple illustration
11, 2, 7, 11, 5, 9, 11 arranged in numerical order, lowest to highest.
2, 5, 7. 9, 11, 11, 11
The median is the middle number, 9.
Perform this calculation for both total male pay and total female pay to identify the mid-range hourly rate for each gender.
Gender bonus pay gap
To calculate the gender bonus pay gap for men, and the gender pay gap for women follow the steps below.
Using the mean or median bonus pay of male employees as follows:
Male total bonus pay – Female total bonus pay x 100
Male total bonus pay:
- Using the following as an illustration. If the male total bonus pay is £3,450 and the female total bonus pay is £2,950, the gender bonus pay gap is
- £3,275 – £2,950 x 100 = 9.9%
The annual salary data is divided into equal quarters as follows
- Rank the hourly pay rates in order
- Divide into four quartiles: lower, middle, upper middle and upper
- Ensure there is an even gender distribution
- Calculate the proportion of male full-time employees and of female full-time employees in each quartile.
Though smaller employers are not required to report on their pay equality, they may be required to do so by a larger organisation who wish to show their commitment to equality and diversity. This will spread the commitment to gender neutral equality, which suits the government’s agenda.
By having a ‘snapshot’ date of one day, there is the possibility that data could be distorted to show a more favourable outcome, for example, by groups of zero hours contract staff not being engaged on that day, so either falling below the 250-employee minimum or by employing more women workers on that day.
There is a possibility that disproportionate or one-off bonuses paid could distort the data, making comparisons year on year difficult.
This is a broad outline of the gender pay gap regulations. If you think that your organisation may fall within the regulations or you need more information then enrol with a payroll-specialist training organisation for a course on gender pay gap regulations.
Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.