1. Gender Pay Reporting PPMA National Event – Manchester 17 March 2016

2. Agenda
Gender Pay reporting Other topical pay issues Apprentices – No NIC under 25s Apprenticeship Levy National Living Wage Salary Sacrifice – consultation Managing the people cost

3. Gender Pay Reporting Background and recent developments
Summary of draft regulations
Defining Pay and Bonus
When and where organisations need to publish?
How the process will be governed
What should employers be doing?
Case study
Risks and challenges
Key considerations 

4. Closing the gender pay gap
14 July 2015 – Government published a consultation “Closing the gender pay gap” – concluded Sept 2015
Focussed on commitment to workplace equality and the intention to implement regulations under Section 78 of the Equality Act “Opportunity is nothing without equality”
October 2015,
Government issued a press release notifying employers with at least 250 employees to publish information about their gender pay gap
Five-year summary report - Women on Boards published on the approach to increase representation of women on FTSE 100 boards to at least 25% by 2015

5. Closing the Gender Pay Gap – consultation response
12 February 2016, the Government Equalities Office (GEO) issued their response to the ‘Closing the Gender Pay Gap’ consultation - the response included:
An overview of responses along with the Government’s conclusion to each question
The proposed draft regulations, accompanied by a further consultation asking ‘What, if any, modifications should be made to these draft regulations?’
Organisations and individuals had until 11 March 2016 to reply to the latest consultation

6. What happens next?
Responses to the latest consultation will then be collated, and the draft regulations (subject to any changes) will then be enacted
The regulations are then expected to come into effect in October 2016 with employers having to publish the required information on a date of their choosing by 30 April 2018 – then annually thereafter
Employers should take the opportunity to consider the implications of the proposals and, where appropriate, respond to the consultation with any concerns that they may have

7. Summary of the draft regulations
The draft regulations propose that organisations will be required to report separate, aggregated figures on:
Pay, Bonus pay
Overall pay distribution by salary quartiles
Which organisations will need to report this information?
The reporting regulations will apply to private, public and voluntary sectors across Great Britain for employers who have more than 250 employees
Employees who ordinarily work in Great Britain and whose contract of employment is governed by UK legislation
Employers are required to take a snapshot of data for the period including 30 April 2017, and publish the required information on a date of their choosing by 30 April 2018

8. How is Pay defined? Pay is defined as: Basic pay including paid leave
Maternity pay and Sick pay
Area allowances
Shift premium pay
Bonus pay, and
Other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances)
It does not include pay for a different pay period, overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax

9. How is Bonus Pay defined?
Bonus pay is defined as: ► Payments received and earned in relation to profit sharing, productivity, performance and other bonus or incentive pay, piecework and commission ► Long term incentive plans or schemes (including those dependent on company and personal performance), and ► The cash equivalent value of shares on the date of payment

10. What pay elements will need to be reported?
Employers will be required to publish
the difference in mean and median pay between male and female employees for cash payments and short and long- term incentives
Bonus pay
the difference in mean bonus pay between male and female employees, to include short and long-term incentives, as defined above, and
The proportion of male and female employees who received bonus pay

11. What pay elements will need to be reported?
Overall pay distribution by salary quartiles
Employers will also be required to identify the quartiles of the overall pay range (based on the gross hourly rate of pay for all employees), and
Report on the number of men and women in each four quartiles in order to demonstrate the overall pay distribution

12. When do organisations need to publish and where does information need to appear?
Employers have 18 months from October 2016 to publish the required information for the first time, and then annually thereafter
Employers are required to take a snapshot of data for the period including 30 April 2017, and publish the required information on a date of their choosing by 30 April 2018
The information will need to be published on the employer’s website and must be accessible to employees and the public
The information will need to be searchable, presented in English, and should remain in place for at least three years from publication

13. How will this be governed?
Employers will be required to send evidence of compliance to a government website
The signature of a senior responsible person will be required to confirm accuracy of the data
The Secretary of State will conduct periodic reviews of the regulations, and will also publish a report within five years of the regulations coming into force
The Government will run periodic checks for non-compliance, produce publically displayed league tables by sector, and identify and highlight employers publishing full and explanatory information
They may also publicise the identity of employers who have not complied

14. What should employers be doing?
It is important to start to plan how to access, validate and analyse data to determine the gender pay gap from a data and resource perspective
Organisations should consider what level of board involvement will be needed for the appropriate signature to be given
Reward functions need to consider how this activity can be built into their existing processes, and consider carefully the best time to publish
The first report will be critical in setting the baseline for future reports

15. Understanding the reasons for pay disparity
It is essential to identify the underlying cause of the pay gap, as this will inform any action plan
Two significant points for consideration to understand any gender pay gap will be:
Occupational segregation: Is their an imbalance in the representation of each gender in certain roles or levels within the organisation?
consider assessing the talent pipeline and the types of roles that women are conducting in relation to men
is any inherent bias in recruitment or retention policies (e.g., levels of flexible working)

16. Understanding the reasons for pay disparity
Pay: Is the pay gap driven by issues relating to pay, grading or performance management?
For example, consider a review of pay practice by grade, taking material defence factors (e.g., performance ratings, length of service etc.,) into consideration
rule out any equal pay issues

17. Case study – what are the issues?
Please take 5 minutes to discuss the following
Organisation has 2,000 employees and operates a pay spine
Split 60% women, 40% men
You had to settle an equal pay claim 8 years ago – the organisation has recently restructured and many jobs/responsibilities have changed
Average tenure 14 years male, 8 years women
80% of senior managers are male
Organisation pays market supplements where appropriate
15% of the workforce is part-time/job share (90% women), 3% of staff on maternity
Significant number of men work shifts, receive on call and standby allowances. Male workforce more likely to have “mobile” jobs
There are cash allowances for cars, these are grade related and essential user allowances
Performance related pay – top 10%
Salary sacrifice schemes – childcare, low CO2 cars and buying annual leave

18. What are the risks/challenges?
Raised awareness may lead to discrimination claims
How do you communicate to avoid reputational damage
Recruitment and retention issues
Recent survey suggests 66% would not work for an organisation with a gender pay issue
Embedding change in the organisations strategic plans when female representation at senior level is lower
Understanding the reasons why pay is different – pay and working arrangements can be complex
Could this give rise to an increase to the pay bill when budgets are severely under pressure?

19. Key considerations Who should be involved?
Reward teams undertaking the analysis should work closely with communications, legal, employee relations and diversity colleagues in order to shape the messaging
Emphasis on increasing the understanding - where the gap in pay lies and how the organisation is addressing it
How will the pay gap will be communicated to both employees and the external market?
How to measure success
a visible reduction in the pay gap from one year to the next but are there others?
Put in place a transparent action plan to support your goals

20. Other topical pay areas

21. National Living Wage
Compulsory from 1 April 2016
£7.20/hour for workers aged over 25 (£9/hr by 2020)
NMW rate otherwise £6.70, lower rates for under 21 and apprentices (£6.95 from October 2016)
Penalties of up to 200% (max £20k per worker)
HR/systems/salary sacrifice issues

22. Apprentices – No National Insurance under 25s
Employer guidance 2 February 2016
insurance-contributions-for-under-25s-employer- guide/paying-employer-national-insurance-contributions-for- apprentices-under-25
No employer NIC in respect of apprentices under 25 from April 2016 on earnings below £827 a week
Must be following an approved statutory apprenticeship framework – apprenticeship has to receive govt funding
Similar provision to employing under 21s – no employer NIC up to UEL

23. Are you ready for the Levy?
The new apprenticeship levy will apply from April 2017.
The levy is set at 0.5% of total paybill costs
Each employer has an allowance of £15,000 to offset against the payment
An employer’s paybill costs would need to exceed £3m before any payment is due
On this basis, fewer than 2% of employers are likely to pay the levy because it is set at 0.5% of total paybill costs, with each employer having an allowance of £15,000 to offset against the payment)
The levy would be payable through their PAYE return to HMRC, and employers with multiple PAYE schemes will need to ensure that the £15,000 allowance has been correctly allocated to ensure the correct amount of the levy is paid
Please note that further guidance is anticipated to be published in the near future

24. Are you ready for the Levy?

25. Are you ready for the Levy – issues?
0.5% Rate and “paybill”
Meaning of the term “paybill”
What is to be included in the paybill calculation? (e.g. earnings of secondees, agency workers)
£15,000 threshold
How is the threshold supposed to operate? Would you need to pay and then reclaim the amount?
Apprentice”- unclear definition
“Employer”- unclear definition
Logistics and Implementation of the Levy
Is the digital account only accessible to those in England or will Scotland, Wales and Northern Ireland also be included?
How long funds will be accessible in the employer’s digital account (two years has been the main suggestion yet still undecided)
How will administrative burdens be reduced?
Definition of “direct training costs”? What can apprenticeship funds be used for?

26. Public sector apprenticeship targets
January 25th “We're seeking your views on which public bodies in England should be set targets on the number of apprentices working for them.” See nsultations/public-sector- apprenticeship-targets

27. Salary Sacrifice December - Autumn Statement
The government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The government will gather further evidence, including from employers, on salary sacrifice arrangements to inform its approach.
January - Hastily arranged “Consultation”
Lack of understanding
HMRC Know Your Customer asking employers for figures on tax/NIC “saving”
March – Budget
Further consultation
Risk of total abolition or just specific benefits at risk?

28. Managing the people cost
Upward pressure on pay (NLW, AE, end of contracted out NIC, apprenticeship levy) – budget cuts
Salary sacrifice/flexible benefits – increasing take-up and/or new benefits?
Continuing benefits during maternity – Peninsula Business Services
Flexible working arrangements – part-time/job share
More apprentices/younger workers?
Voluntary redundancy – impact of £95k redundancy cap
Reducing agency spend – better use of internal resources, better internal controls/procurement

29. Managing the people cost
Job evaluation – understanding the workforce, enhancing jobs
Training – upskilling the workforce
Managing the overtime and allowances spend
Annualised hours contracts, seasonal jobs
Payments to encourage workers to opt out of pensions?
Better use of MI
Shared service centres for managing HR
Managing sickness and other policies currently managed by line managers
More robust performance management