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Mandatory Gender Pay Reporting, New Obligations and Issues for Partnerships
Overview of provisions
New obligations to report on gender pay gaps will apply to large employers through new Regulations to be implemented by the end of 2016. The reporting will apply be each legal entity with 250 or more employees.
For professional partnerships and LLPs particular issues arise:
• the potential for the reporting to include some or all of a firm’s partners
• the gender profile in many professional sectors and the scrutiny which the reported figures may attract; and
• the inclusion of bonus and as a result perhaps some profit share levels, in the reporting requirements.
Key time frames
• The Regulations should be implemented by December 2016
• The first report will be 18 months from implementation before 30 April 2018
• The first report will be on pay at April 2017 and bonuses paid in the 12 months before April 2017
• Thereafter annual reporting by April each year.
Who is in scope to report on?
“Employees” is not currently defined explicitly in the draft Regulations which we have seen and which will be in final form shortly. The Government says the wider definition under the Equality Act 2010 will apply; this means reporting on those working under a contract of services (employees) or to personally carry out work (so includes some partners and consultants).
Reporting will have to include the pay and bonuses of LLP Members who are recognised in law as workers, salaried members and potentially also fixed share members or partners – excluding equity partners. It will also include self-employed consultants (who are often retired partners).
Only employers who at the reference date (April) have 250 or more UK employees, who ordinarily work in Great Britain under a UK contract, must report. This will impact on partnerships set up outside the UK with employees here and if the UK business employs 250+ in the UK, those UK employees will have to be reported on.
As drafted, each legal entity must report on their employees. Group reporting may be permitted, given representations which have been made but seems unlikely. A business may have a UK partnership (legal entity) with representative members from the main overseas partnership, or an LLP which owns a corporate entity who is the employer; it is only the legal entity which is the employer which needs to report.
There may be merit in having legal separate entities for partners and employees (especially if the number of non – equity partners is below 250.
What has to be reported on?
1. The mean hourly gender pay gap between all men and women
2. The median hourly gender pay gap between all men and women
3. The mean gender bonus gap between men and women
4. The % of men and women participating in the bonus
5. The distribution between men and women in salary quartiles.
Pay and Bonus
Pay includes basic pay, holiday pay, premia (such as London allowances), maternity pay and any bonuses paid in the pay period which includes the April reporting date. Any bonus paid in the April pay period must be included in the hourly pay calculation (items 1 & 2 above) .By contrast, benefits in kind, redundancy pay and expenses are excluded.
Reporting on the Pay Quartiles- Salary bands
The 5th item requires the partnership to identify men and women by population quartiles by reference to the pay bands in which each group falls. The pay range is not required and the 4 bands can be identified simply as Band A, B, C and D. In many partnerships there will be a higher number of women in support and administration roles and thus the lower pay bands, and more men in the higher bands, salaried partners or members and non-partner senior management roles.
Bonus Pay Gaps & Profit Shares
Bonus is defined widely. For the separate bonus reporting figures (items 3 &4) all bonuses paid in the 12 months before the April reporting period must be calculated.
Bonus Pay includes profit share, productivity, and performance pay schemes and other bonus or incentive payments. Undoubtedly any profit share would be regarded as an incentive payment however, this leaves unanswered how monthly drawings on account of profits (outside the April pay period) are to be treated – one assumes the 11 months are not pay but bonus.
Only those in receipt of a bonus in the 12 months prior to the reporting date have to be included. Given the first reporting date is April 2018, bonuses paid to staff in the current year 2016 to 2017(i.e. current bonuses!) will be reportable.
In partnerships with a year-end of 30th April, the amount of any profit share will not be known until the accounts are finalised and paid in the following financial year. The Regulations require the bonus or profit share to be calculated and reported by reference to the date of payment, in other words, the financial year in which it was paid (not earned).
Where will this have to be published?
This data will have to be on the employer’s UK website - accessible to its own workforce and the public. It must also be certified as true by a partner or designated member in an LLP.
The Government will maintain a website on which the information will have to be uploaded although no details have as yet been provided.
Fox Williams is monitoring the legislation closely and in discussion with a number of business bodies and clients, advising on the implications of this new law.