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April 5 is the first "snapshot date" for the data gathering requirement under the U.K. Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations). We thought it would be helpful to share some of the tricky issues we have encountered, as we all get to grips with the detail in the Regulations.
A number of clients have contacted us for clarity over how their pay and benefits system fits into the various definitions within the Regulations. Where you are dealing with grey areas and you've had to make a judgement call, we recommend that you explain your approach within the narrative. Organisations must bear in mind that a director (or equivalent) must sign the declaration of accuracy before approving your gender pay gap report. Additionally, clarity on methodology used this year will be important in ensuring consistency in future years, and/or in addressing any modifications. We recommend that a team is involved in the data gathering and reporting process to deal with the tricky issues since the person running the numbers in payroll or reward may not have the same level of technical knowledge as the HR manager who is overseeing the project.
We run our payroll at the end of April. How do you deal with new joiners and leavers between the snapshot date and the end of the month? The snapshot date is significant as this is the day when you assess the number of relevant employees for the purposes of the 250 threshold and the employees to include in your calculations. That means if someone joins on 6th April they should not be included in this year's report. Likewise those who leave before 5th April but receive pay in April should not be included.
We have less than 250 employees but if we include partners this takes us over the 250 requirement. Are we caught by the Regulations? Technically on a literal interpretation of the Regulations partners may be included in the threshold figure since the trigger is whether an employer has 250 employees on the snapshot date (as opposed to 250 relevant employees). However, partners are certainly excluded in relation to any of the pay reporting obligations because they are specifically excluded from the definition of "relevant employee."
Should we include consultants and board members in the pay gap calculations? The ACAS guidance explains that the definition of employee covers some self-employed people where they have a contract to provide personal service. This may extend to board members and consultants, unless they provide their services via a service company or it is otherwise clear they do not have to perform services personally, in which case there is no obligation to include them in your figures.
Can we exclude consultants if we don't know how many hours a week our consultants work? There is some scope within the Regulations to exclude self-employed consultants (who are otherwise caught) where it is not reasonably practicable for an employer to obtain the data necessary for the Gender Pay Gap reporting. The ACAS guidance suggests that before arriving at this conclusion an employer should at least try to obtain the information by asking the consultant for the information. The guidance also suggests that new consultancy agreements are drafted in such a way to impose obligations on consultants to retain pay and hours worked for the purposes of compliance with the Regulations.
How do you deal with pension contributions? This depends on how an employer administers the pension and there is a distinction between employer and employee pension contributions. Employer pension contributions are not "pay." They are contributions paid by the employer rather than monies deducted from the employee's pay and so do not affect the Gender Pay Gap or bonus. Where employee pension contributions are made via salary sacrifice then this sacrificed aspect should also be excluded. The salary that has been sacrificed is in return for an additional employer pension contribution.
Are tips included in ordinary pay, in situations where the employer distributes the tips and deducts PAYE and NIC? We do not consider that tips would be covered as they are not considered pay for the purpose of National Minimum Wage calculations.
How do you calculate working hours with rotas where people work e.g., 3 weeks on 3 weeks off? Where there are no fixed hours on a weekly basis (or over a period) the Regulations will normally require a 12-week reference period to be used to determine the weekly hours, but this may vary depending on how the rota contracts are drafted in relation to weekly hours. Where averaging, the Regulations state that during this 12-week period no account should be taken of weeks which are not worked, meaning that the average figure would relate only to the working weeks. If this method is adopted this will result in a very low hourly rate. An alternative approach may be to take an averaging reflecting the whole work and leave pattern, which may not be technically correct but may present a more realistic account of what pay is based on. Any such judgement calls should be carefully recorded.
Alison Woods is an attorney with CMS Cameron McKenna in Aberdeen, U.K., and Paul Graham is an attorney with CMS Cameron McKenna in London. © CMS Cameron McKenna. All rights reserved. Reposted with permission of Lexology.
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