The requirement for businesses to publish gender pay gap reports was cancelled in 2020 as a result of COVID-19. Gender pay reporting is, however, back on the agenda for 2021 so is there anything new that you need to know?
In short, yes. There has been a lot of commentary over the last nine months about the impact of Covid-19, and particularly furlough, on gender pay statistics (see our previous article here https://www.shoosmiths.co.uk/insights/articles/covid19/covid-19-and-its-impact-on-women-at-work). The good news is that new guidance has been released which clarifies how organisations should be referring to furloughed employees for the purposes of gender pay gap reporting. The key points are:
Furloughed employees will need to be taken into consideration when businesses are determining whether or not they have 250 employees. For example, a company which has 300 employees in total would need to report, even if 250 of those employees were not actively working on 5 April 2020 (as a result of being placed on furlough leave).
The gender pay gap and salary quartile bands are calculated based on full pay relevant employees. This means that, furloughed employees should be excluded from the calculation if their salary wasn’t topped up by their employer. For example:
- Sally was furloughed between 1 April 2020 and 31 May 2020. During that period, she received 80% of her salary, subject to the statutory cap. Sally will not be a full pay employee for the purposes of pay gap reporting and therefore her salary not need to be included in the average pay gap calculations or salary quartile bands.
- Sam was also furloughed between 1 April 2020 and 31 May 2020. During that period, she received 100% of her normal pay as her employer topped up her wages to make up the shortfall between the amount which it could claim back under the Coronavirus Job Retention Scheme and Sam’s normal monthly salary. Sam will be a full pay employee for the purposes of pay gap reporting and therefore her salary will need to be included in the average pay gap calculations and the salary quartile bands.
Furloughed employees will, however, need to be included for the purposes of the gender bonus gap calculations.
What do we think?
The inclusion of furloughed employees within the scope of gender pay reporting would undoubtedly have affected the figures so we can understand the rational behind their exclusion. How the data was affected would depend upon the business/sector but it could have:
- Increased the gap if a larger proportion of women were furloughed in a particular business;
- Artificially reduced the gap if higher paid male employees were furloughed and adversely impacted by the application of the cap on grants under the Coronavirus Job Retention Scheme.
That said, given the statistics that have been released over the past year about the impact of COVID-19 on women at work (again, see our earlier article on this), removing furloughed employees from the scope of gender pay reporting doesn’t give the full picture on the position of women within an organisation’s workforce and, in many ways, will simply render this year’s reporting as meaningless.
As a result, as well as reporting normally (with the exclusions as advised by the guidance) via the government pay gap portal, businesses may want to publish a supplementary update on their website which looks at the statistics through an ‘if COVID-19 hadn’t happened’ lens. This would provide a helpful additional level of analysis when comparing previous and future years’ pay gaps and the effectiveness of steps being taken to reduce the gender pay gap within an organisation.
While ethnicity pay gap reporting is not currently mandated by the government, there is a consensus that such reporting should take place, and ethical businesses may also want to voluntarily publish these figures on their website as well as their gender pay gap report.
For ease, we have included links to the new guidance here.