Mandatory gender pay gap reporting—lessons learnt

1. Preparation

The Gender Pay Gap Information Act 2021 cites 11 data points that must be included in companies’ gender pay gap reports. Organisations must understand what is required to meet their obligations.

We recently supported several organisations with internal reviews of their gender pay gap numbers as they prepare their 2023 analysis. Common issues we uncovered include:

• a misunderstanding of what constitutes ‘ordinary pay’;

• the treatment of social welfare benefits; and

• the calculation of hours worked not consistent with pay (e.g. hours not adjusted for part-time changes, overtime, or periods of unpaid leave).

Employers must clearly understand the legislation to ensure that the correct data is extracted and measured.

2. Interpretation

Some aspects of the legislation remain unclear, and judgement may be needed on how to apply certain provisions to the data.

Also, calculations will need to be re-run annually. The pay gap number reported for year one will be the baseline against which employers will measure annual progress.

In this context, employers should document the approach and rationale taken across a range of items, including the treatment of:

• interns, international assignees, and  joiners and leavers;

• part-time and full-time employees;

• periods of absence;

• overtime, including on-call allowances;

• share awards;

• social welfare payments;

• Benefits-in-kind; and

• vouchers.

This record will be an important starting point for subsequent years, ensuring that like-for-like is compared.

3. Calculation and testing 

Employers must test their numbers before publication, ensuring they understand the rationale and approaches. Equally, employers should check their calculations against the provisions of the legislation and accompanying regulations. Some common computational errors we uncovered include:

1. dividing the average pay/bonus gap by all employees rather than the average male pay/bonus;

2. calculating the bonus gap by reference to all employees instead of just those who received a bonus;

3. pro-rating the bonus for both average pay and average bonus; and

4. quartiles not adding up to 100%.

When testing the numbers, employers should also be vigilant for any employee(s) tracking below the National Minimum Wage or any areas that may trigger equal pay concerns. Such issues may indicate errors in the data and calculations rather than an underlying National Minimum Wage or equal pay issue.

The three key actions to take now

Pay gaps are only the tip of the iceberg. Pay equity plays a pivotal role in a company’s environmental, social and governance (ESG) strategy. The EU Pay Transparency Directive, which will likely come into effect in 2026, will also introduce significant transparency measures and could be a game-changer.

Obligations and expectations will only increase, and we work with our experienced inclusion, diversity and equity (ID&E) advisory colleagues to support organisations engaging in, and preparing for, this wider horizon.

However, in terms of employers facing the second year of gender pay gap reporting or employers with 150 or more employees preparing to report in 2024, lessons can be learnt.

1. Preparation is key: understand the legislative requirements and how they apply to your employee population and pay elements.

2. Documentation is essential to future reporting cycles: only by documenting your methodology and approaches can you be sure that you report on an equivalent basis year-on-year.

3. Check it once, check it twice: your gender pay gap report will attract attention from internal and external stakeholders. It must be computationally accurate and in accordance with the methodology set out in the legislation.

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We would be delighted to share our experience and ‘lessons learnt’ with you. Contact us today.