Draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017

Caroline Dinenage Excerpts

Wednesday 25th January 2017 General Committees

[The Parliamentary Under-Secretary of State for Women and Equalities (Caroline Dinenage)]

I beg to move,

That the Committee has considered the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.

It is an absolute pleasure, as ever, to serve under your chairmanship, Sir David. Section 78 of the Equality Act 2010 delegates powers to Ministers to make regulations requiring employers in Great Britain with at least 250 staff to publish information showing whether there are differences in pay between their male and female employees. These regulations are the first use of the power under section 78, because this Government are committed to tackling the pay inequality that has existed between men and women for far too long. That is why we are taking bold steps to tackle the gender pay gap. That is not just good for women; it is good for the country as a whole. McKinsey estimates that eliminating work-related gender gaps could add £150 billion to our annual GDP.

The gender pay gap is not about men and women being paid differently for the same job—unequal pay has been prohibited since 1975—but is a measurement of the difference between men and women’s average earnings. We will continue to implement a wide range of measures to tackle the wider causes of it. The UK’s overall gender pay gap has fallen over time. Ten years ago it was 25% and, according to the latest Office for National Statistics figures, today it stands at about 18.1%. While that is the lowest on record and it is moving firmly in the right direction, progress is still far too slow and voluntary reporting has not led to sufficient progress. Following two public consultations and extensive stakeholder engagement, the Government are delivering our manifesto commitment to require large employers to publish a range of complementary gender pay gap measures every year, starting this year.

Publishing the difference between the average hourly rate of pay for male and female employees, calculated using both mean and median averages, will give employers a better understanding of their gender pay gap. Bonus payments are a significant element of overall remuneration in some sectors, and ONS figures show that more than £44 billion was paid out in bonuses across the UK economy during the 2015-16 financial year. Publishing the difference between the average bonuses paid to male and female employees will encourage employers to ensure that those practices are fair and transparent. Fewer women than men are employed in senior and higher-paid professions. Requiring employers to report on the proportions of men and women in each quartile of their pay distribution will ensure that they consider whether there are any blockages to women’s progression within an organisation. That could be valuable in making comparisons with competitor employers that are actively nurturing female talent.

The principle of greater transparency on gender pay differences has cross-party support. It will incentivise employers to analyse the drivers behind their own gender pay gap and explore the extent to which their own policies and practices may be contributing to it. The regulations are, of course, only one element of the Government’s strategy to meet the needs of women at every stage of their working lives, and by working together we can make real progress in closing the gender pay gap.

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[Caroline Dinenage]

I have been very taken with the contributions from all members of the Committee—I was so absorbed that I nearly forgot to stand up for a moment. I thank everybody who has taken part in the debate; I always welcome feedback and questions from Members.

We all agree that it is completely unacceptable that a gender pay gap still exists in this day and age. The regulations will create opportunities for both individuals and employers by driving action that promotes greater gender equality in workplaces across the country.

Back in 2010 there was a coalition Government agreement to take a voluntary approach to this issue, because that was a powerful tool in bringing businesses with us. If hon. Members will bear with me, I will explain a little later why bringing businesses with us at every stage was important. That approach encouraged more than 300 employers—big employers with a staff of many thousands between them—to begin to think about the gender pay gap. It laid the groundwork for that important work to move forward, so it is a little unfair to disparage it as meaningless, toothless and pointless. There was a point to it, and it engaged the business community with this important issue.

As I mentioned in my opening comments, we have undertaken extensive consultation with employers and stakeholders to develop these regulations. In addition to two public consultations, the Government Equalities Office held roundtables with employers, women’s civil society, trades unions, academics, legal associations and experts in gender pay analysis. Having worked closely with such a wide range of stakeholders, we can be confident that the requirements are clear and proportionate and will drive real change in workplaces across the country.

The Secretary of State will review the regulations five years after their commencement just because that is the legal requirement, but that is not to say that we will not look at them in the interim. We will keep a close eye on them to make sure that they are being enforced properly. We have worked closely with ACAS to develop clear and user-friendly guidance to help employers understand and implement the regulations. That draft guidance will be published shortly.

The range of metrics that the regulations require will ensure that no large employer can claim that it is unaware of whether it has a gender pay gap. The publication of the information required will increase employees’ confidence in their employers’ remuneration process and could enhance an employer’s corporate reputation.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am sorry to interrupt a speech that my hon. Friend is making with such eloquence and competence, but the explanatory note say that section 78 of the Equality Act

“does not apply to government departments, the armed forces or other public authorities listed in Schedule 19”.

It goes on to say that, in October,

“the then Prime Minister announced that these large public sector organisations would also be required to publish details”.

Can I take it that the regulations do not legally require Government Departments to publish the details, but that they will do so on a voluntary basis? Can she also confirm that all non-departmental organisations and large charities with more than 250 employees will be included?

[Caroline Dinenage]

We have laid the regulations that will ensure that public sector organisations, and indeed charities, are included in the legislation.

[Hannah Bardell]

On the point about listed public authorities, is she aware that in Scotland we have reduced the threshold for reporting from those with more than 150 employees to those with more than 20 employees? Does she foresee her Government working with the Scottish Government on the success of that, and perhaps lowering the threshold for the rest of the UK as well?

[Caroline Dinenage]

I speak as someone who ran a small business for 20 years before I came into Parliament, so I look at it from a different perspective. I do not want to be part of a Government that is crippling, penalising or over-bureaucratising small and medium-size enterprises. Although I am interested in what the Scottish Government have done and will keep it under review, I personally think that the regulations are the best place to start. As I will go on to explain, we want to take business with us at every stage. This is not a punitive measure on business; it is good for business. Making sure that a business encourages the growth, prosperity and development of every single one of its talented workforce is not only the right thing to do but brings massive future economic potential for this country.

The Young Women’s Trust found that 84% of surveyed women aged 16 to 30 would consider an employer’s gender pay gap when applying for a job, and 80% would compare employers’ gender pay gap data when looking for work. Of the employers and business organisations that responded to our first consultation, 82% agreed that the publication of gender pay gap information would encourage them and other employers to take action to close the gap. We can see that bringing business with us on this and convincing them of the merits of it has been one of the key successes of our how we have gone about our policy so far.

[Sarah Champion]

I support what the Minister is saying, because the 11 companies that voluntarily reported said that it led to a more open workplace where employees stayed longer. However, I challenge her on the point that she made to the hon. Member for Livingston, because what we talking about is actually a simple line of coding in an already existing payroll. It is not a big or onerous requirement, so this is not a question of putting overburdening administration on businesses; I think not taking forward reporting for smaller businesses is Government will.

[Caroline Dinenage]

I have to disagree, given that the last thing businesses need is unwieldy bureaucracy from a nosey, over-centralised, self-serving, self-satisfied Government. I speak as someone who, for 20 years, ran a business that had just under 20 employees. We were crippled by much of the legislation that came from the Labour Government. The bureaucracy and paperwork that I had to deal with on a daily basis, on all manner of things, became a real burden on my ability to employ people and create wealth and prosperity for this country. I therefore take increasing the burden of legislation on businesses seriously. If it is unnecessary, I am not prepared to do it, but we will keep the matter under review.

The regulations require employers to publish the relevant information on their own website in a manner accessible to employees and the public. Hon. Members have asked how it will be displayed, saying that it should not be squirreled away somewhere. The information will have to be accessible. All employers within the scope of the provisions will be expected to publish the required information annually, and no exemptions are envisaged. A written statement signed by a director or senior employee must also be published online. As well as confirming the accuracy of the required information, that will ensure that business leaders take ownership of tackling any identified gender pay gaps. We will also require the information to be published on a Government website.

[Vernon Coaker]

Just to be clear, because one or two of us are not sure—that may be our fault—does what the Minister has said today mean that the first time there will be publication relating to transparency on the gender pay gap will be 5 April 2018?

[Caroline Dinenage]

Yes; companies have to start collecting the data from April this year and publishing the information by April next year. That fully conforms to our manifesto commitment, which was for three years of publications before the next general election.

The Opposition spokeswoman raised the issue of the EHRC not having the necessary legal powers. We are clear that the EHRC does have them, as it has recognised. It may issue an unlawful act notice to any person who has committed an unlawful act, such as non-compliance with the regulations. The notice could include recommendations for an action plan to address the unlawful act and to ensure that it does not continue. As well as investigating whether a person has complied with an unlawful act notice, the EHRC may apply for a court order requiring them to take specified steps to comply with the notice. The EHRC has received, and will continue to receive, sufficient funds to be able to fulfil its statutory duties, of which this is one. It is for the EHRC as an independent body to determine the allocation of its overall funding across specific functions. We believe that the £20.4 million of taxpayers’ money that it receives is sufficient for it to carry out these important duties.

The regulations do not create any additional civil or criminal penalties, and failure to comply would be an unlawful act, as I said. Many consultation respondents felt that disproportionate sanctions would defeat the object of ensuring that a sufficient number of employers take direct responsibility for promoting gender equality in their workforce. We feel that competition in sectors, as well as the risk of brand and reputational damage, will drive compliance. Many employers will see this as an opportunity to put proactive strategies in place to tackle the barriers facing their female employees. Consultation responses highlighted that that approach should have much more of an impact, in terms of making a positive change, than a box-ticking exercise to avoid financial penalties would. Relying on fixed penalties from the outset could encourage some employers simply to pay fines rather than to undertake the necessary pay analysis and do the donkey work involved in making the proposals work.

Crucially, during a roundtable with women’s civil society and trade unions, there was broad agreement that compliance measures should not be so harsh that they risk incentivising employers to subcontract female employees. That is not only about being a friend of business, but because it is so important for women. Rather than just creating a low gender pay gap, we want to create the right type of low gender pay gap. Some industries—indeed, some countries—with low gender pay gaps have very low rates of female employment. That is not because they have a lot of women in high-paid jobs, but because they do not have women in work at all. That shows low workforce participation and high social inequality. The launch of the Government website allowing employers to publish the required gender pay gap information will coincide with the commencement of the regulations, which will allow us to monitor levels of compliance closely. So we will not just be looking at the data once every five years; we will monitor it.

[Vernon Coaker]

May I suggest to the Minister that the first time it is published on the Government website, she makes a written or oral statement, to signify to everyone how important this is, and to get it out there with a bit of urgency and excitement about it?

[Caroline Dinenage]

I cannot imagine anyone would need to encourage a politician to seek publicity. Of course, I will shout it from the rooftops if it will make the hon. Gentleman happy. We will keep our position on financial penalties under review, in the light of employers’ willingness to comply with the reporting requirements during the early years of implementation. The public will be able to search the Government’s website to check whether employers in the scope of the regulations have complied with them and to compare them with other employers in the same sector. We will consider the most effective way to present the published information, in discussion with a wide range of stakeholders.

The hon. Gentleman asked about the scope of the regulations. We calculate that they will affect about 8,000 employers, who between them have more than 11 million employees. An estimated 3.8 million employees will also be covered by separate gender pay gap regulations that will apply to public authorities. In total, the new gender pay gap regulations will cover nearly half of the total workforce.

I agree that we need to challenge gender stereotypes, from the division of unpaid work to the types of occupations that men and women pursue. The Government are looking really closely at that. The hon. Gentleman hit the nail on the head when he said that men need to act as agents of change. Men can be the most powerful agents of change. That is why the Government set up the Women’s Business Council, which has recently expanded to include more men. One of its key work strands is about men as agents of change, and it is about to issue awards recognising men who do fantastic work promoting women in the workplace across the UK.

On SME reporting, I have already spoken a lot about how it could impose too much of a burden on small businesses. At the moment, large employers alone are being required to report, but we will encourage small employers to analyse their pay data and take action where issues occur. I also think that, through the supply chains of big businesses, this will filter down to smaller companies anyway.

The regulations covering the public sector, including Government Departments, were laid last week, and public bodies will be required to publish gender pay gaps every year. The gender pay gap of the Department for Education in 2016 was 5.9%, I am pleased to say.

[Vernon Coaker]

I am sorry to keep asking questions, but is that timetable for public bodies the same as for private bodies?

[Caroline Dinenage]

Yes, it is exactly the same.

The female employment rate is currently the joint highest on record, at 69.8%. The female participation rate has increased by more since 2010 than during the three previous Parliaments combined. We agree, of course, that there is a wider gap for older women, as the hon. Member for Feltham and Heston described. That can be explained in part by age, but not completely. That is why we have introduced measures such as extended flexible working, shared parental leave and increased hours of paid-for childcare—working couples can expect 30 hours from September.

We are not requiring gender pay gap reporting by age, as workforce demographics vary significantly. Such reporting could also raise confidentiality issues, if a company had only a small number of employees in one age bracket. That was raised with us as a concern, and we do not want to betray anybody’s confidence. We agree that the data need to be owned across organisations, which is why we will require a senior director to sign off the data. We will closely monitor compliance on that.

I was asked about devolved approaches. Section 78 regulations cover England, Scotland and Wales. Scottish and Welsh public bodies are subject to their own specific duties in regulations under section 153 of the Equality Act, but the Equality and Human Rights Commission works across England, Scotland and Wales.

[Seema Malhotra]

Can the Minister clarify one point? This may be in the details we have been given, but will companies be required to report on the gender pay gap in their annual reports?

[Caroline Dinenage]

I am not entirely sure whether they will be required to do that, but they will be required to publish the information on a website that is readily accessible. It cannot be hidden away in a tiny little corner of their online presence that nobody can find. We will then republish that information on the Government website, so it will be easily accessible.

We know that transparency may not be a silver bullet, but it will incentivise employers to analyse the drivers behind their gender pay gap and explore the extent to which their own policies and practices might be contributing to it. I am really pleased that the regulations are broadly supported by the House, and that we agree on the underlying policy intent. I understand that we might have slightly different motivations about how we want to support businesses—whether we want to cripple them with massive amounts of bureaucracy or support them to create the jobs that the country needs—but I truly believe that this reporting marks a significant step forward in making that policy intent a reality, and I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.