April 11.2019, 9.00am
3 Reasons Why UK Gender Pay Reporting is in the Spotlight
Two hundred years from now, men and women will have equal pay. It’s a stark finding from the World Economic Forum (WEF), and it raises the discussion that despite all the tremendous progress that has been made in closing the gender pay gap, the uphill trek is likely far from being over.
The UK is making strides in trying to close the gap and The Equality Act 2010 – which brought gender pay reporting into play in 2017 – is one example of this. The regulation was well received and has become the standard operational norm for most companies, but that doesn’t mean it has been designated as just another box to tick for compliance.
Apart from the startling research the WEF released on the future of pay equality; there are other reasons it’s not leaving the public spotlight anytime in the near future. With the new CEO pay ratio reporting regulation coming into effect in the 2019 financial year, gender pay reporting has taken an even greater step into the limelight – and not for the right reasons!
CEO pay ratio law is right around the corner
Starting in 2020, public companies in the UK with more than 250 employees will be required to include greater detail about their CEO’s pay. The goal of the CEO pay ratio regulation is simple enough: help the public and the government understand how the CEO’s pay compares to the workforce at large.
Compliance will hinge on the directors’ remuneration report, which will need to include, among other information, the total compensation paid to the CEO over the previous fiscal year. Organisations will also be responsible for figuring out the ratio of that pay in relation to the 25th, 50th and 75th percentile of its workforce’s pay – also known as P25, P50 and P75.
There are three ways that businesses can work out this ratio:
- Using pay and benefits within the business to calculate P25, P50 and P75
- Using information gathered by the gender pay gap reports to generate P25, P50 and P75
- Using other information within the company that may be more accurate than gender pay gap reporting
It’s easy to see that the ability to generate and manipulate data sets is critical in complying with the new UK CEO pay ratio regulation, especially the newly installed gender pay gap reports. Unfortunately, many companies still struggle with gathering that information in the first place.
Organisations need to walk before they run
The gender pay gap reporting regulation has been in effect for two years now, yet 25% of businesses are submitting non-compliant reports to the UK government, HR Review reported.
Given that companies have known about the requirement for the last two years, their issues around reporting on this won’t be going away anytime soon. In fact, the pending CEO pay ratio regulation will only compound those issues.
What’s the main reason behind their troubles? Here at CoreHR, we’ve come across a few:
- Genuinely understanding the requirements and how to produce the metrics that meet compliance
- Not having historical entries and data to pull from in order to check if the work is being done correctly
- Narrowing down which data fields are required for compliance and finding the right template to publish them
The underlying challenge for many HR teams is simply understanding what the UK regulators expect of them and gathering that data into a compliant format. However, we’ve found out over these last two years that finding a solution to this is often easier said than done.
One of the reasons enterprises struggle with overcoming the compliance hurdle is in the vast amounts of data that an organisation manages. If certain aspects of HR are siloed, it can be difficult to get a unified picture. This leads to skewed data or an incomplete picture of the actual gender pay gap.
CEO pay ratio won’t be the only regulation to piggyback off of the gender pay gap compliance report. Ethnicity and disability reporting are on the horizon and some companies are being proactive about its introduction by preparing templates and data reporting standards to accommodate this. The gender pay gap reporting regulation will also be mandated in Ireland in the near future; although a starting date has yet to be confirmed, it will initially apply to companies with 250 or more employees and become a regulation for companies with 50 or more team members by the end of its third year.
Get compliance right – starting with gender pay reporting
Reporting requirements will continue to intensify over the next few years, leaving under prepared HR teams struggling to maintain compliance. Sometimes getting the company in line is easy; others may demand a whole new take on gender pay gap reporting.
The regulation is a stepping stone for future reporting policies – and is even a component of compliance for some of them. Apart from that, the gender pay gap is an important issue that every employer should be working diligently to overcome.
Companies that have bought into the power of unified HR are already benefiting from the capabilities of payroll software, which makes the analytics aspect of reporting that much easier. By using pre-built templates which aggregate the information that digital HR platforms generate, organisations are able to easily meet compliance with a variety of regulations.
In addition, with analytics readily available thanks to the constant aggregation of information, companies can be proactive with their gender pay reporting in a couple of ways. By having access to this information at any time in any day, businesses can use the data to better understand the root causes behind the gap or why certain groups of staff are uniquely affected by certain changes within the organisation.
Compliance will continue to be a major topic for every HR team moving forward, and the most common question will be whether they’re meeting regulatory requirements or not. If the CEO pay ratio policy is any indication, gender pay gap reporting will be a critical element of compliance – one that companies can’t afford to ignore.
By Joe Forristal