Employers still need to prepare their Gender Pay Gap Report for the year 2020-2021

Gender pay gap reporting was introduced in 2017 and the rules around the process are set out in The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. However, employers only went through 2 full cycles of publishing their reports before COVID-19 affected the process.

The effect of COVID-19 and furlough on gender pay gap reporting for 2021

Gender pay gap reports must be submitted at the end of March or beginning of April each year. However, due to the Coronavirus outbreak, the government took the decision in March 2020 to suspend the enforcement of the gender pay gap deadlines for the reporting year of 2019-2020. This resulted in there being no obligations on employers to report their gender pay gap data in April 2020 based on the figures from April 2019.

This was a one-off suspension. There has been no amendment so far for the reporting period 2020-2021 and there has been no indication that there will be. Therefore, employers need to ensure that they continue to report their gender pay gap data this year as usual.

In this blog we explore the impact furlough leave and the COVID-19 pandemic have had on gender pay gap reporting and the issues employers should watch out for.

What is the gender pay gap report and who needs to make one?

The gender pay gap is the difference between the average earnings of men and women across a workforce. This is calculated by using the mean or median earnings. The aim of the report is to show how large the pay gap is between male and female workers in a company and to encourage companies to take steps to narrow this gap.

From 2017, any employer who has a headcount of 250 or more staff must comply with regulations on gender pay gap reporting.

What is the report based on and when does the report need to be made by?

When the report needs to be made depends on whether the employer is a public authority employer or not. The deadlines are based on a “snapshot” date. Companies must use their payroll data from that date each year to prepare their report.

Most public authority employers must use a snapshot date of 31 March. They must then report and publish their gender pay gap information by 30 March of the following year.

For private, voluntary, and all other public authority employers, they must use a snapshot date of 5 April and must then report and publish their gender pay gap information by 4 April of the following year. Employers in this category must also include a written statement confirming that their published information is accurate.

All employers can also choose to add a supporting narrative to explain the figures and set out any steps they have taken to narrow the gap.

These documents must then be published on the employer’s website in a prominent place for the public to easily find.

How does furlough affect this process?

The Coronavirus Job Retention Scheme (commonly known as the furlough scheme) is likely to affect the reporting carried out for the gender pay gap because furloughed employees can be treated differently.

The key impacts are:

• Furloughed employees and other employees who agreed to different arrangements for their pay still need to be counted in the headcount figure for the organisation as a whole.
• Furloughed employees and other employees who agreed to different arrangements for their pay still need to be included when looking at the percentage of those getting bonus pay as those calculations are based on headcount and not the pay they receive.
• Furloughed employees who did not have their normal pay topped up to 100% by their employer do not need to be counted when looking at the calculations based on hourly pay. This is because those calculations use the “full-pay relevant employees” criteria and furloughed employees don’t meet that criteria as they were paid a reduced rate for periods of furlough.
• Furloughed employees who had their pay “topped-up” to 100% or employees who agreed to defer any payments (whether furloughed or not) will still be counted as “full pay relevant employees” as they would have got their normal salary for each pay period. They should be included in all calculations.
• Employees who were not furloughed but who agreed to take a fixed pay cut will still be counted as “full pay relevant employees” as their full-time relevant pay will have permanently changed. They should be included in all calculations.

It’s important to remember that this only applies to the snap shot date of 31 March or 5 April 2020. Employers need to look at all employees on their snap shot date in 2020 and apply these principles to them. Anyone who has since agreed to take furlough or agreed to a pay cut will not be affected by the changes for this reporting year.

How does sick leave affect this process?

Over the past year many more employees will have taken sick leave than in pre-Covid times. Employees who were receiving Statutory Sick Pay (SSP) or reduced company sick pay on the snapshot date in March/April 2020, because they have been unwell with Covid-19 or even shielding, should also be excluded from the calculations. This is because they would have been receiving a reduced rate of normal pay and the normal rules for gender pay gap report exclude such employees from the calculations. Employees receiving full sick pay should still be included though.

What are the effects of furlough on the gender pay reports?

Excluding furloughed workers from the figures, as well as those on reduced sick pay, could distort the pay disparities between men and women in an organisation. This is because employers will be basing their average calculations on a much smaller pool of workers.

Depending on the sector and their needs at the time, if large numbers of either female or male employees were furloughed in an organisation because of the specific role that they carried out then excluding them from the calculations could either artificially reduce or enlarge the gender pay gap. For example, if more men than women were furloughed then the gender pay gap will be artificially smaller than it would normally be and if more women than men were furloughed then the gender pay gap will be artificially larger than it would normally be.

This impact is likely to be wide ranging across many employers in the UK. It is therefore vital that employers include a narrative and focus on explaining any discrepancies. Although the accompanying written statement is not compulsory, many employers have already used it to explain their figures. Now more than ever it will enable employers to provide context to the calculations and explain how the furlough scheme has affected their workforce.

Summary

Although the government may still suspend reporting for this year, there has been no suggestion that this will happen. To avoid missing the deadline, employers should therefore prepare to submit their reports and explain their figures in the absence of any further update from the government.

If you have any questions relating to the gender pay gap report or the furlough scheme, please contact a member of the Employment team.