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KPMG unveils five-step plan for gender pay gap compliance

21 / 08 / 2017
KPMG unveils five-step plan for gender pay gap...The gender pay gap is at its lowest ever level in the UK. Unfortunately, the difference between male and female salaries still sits at more than 18 per cent, according to Government Equalities Office figures.

The issue recently splashed across the headlines when the pay of high-profile BBC personalities was released, with male stars earning significantly more than their female counterparts.

Men comprise nearly two-thirds of the BBC roster earning over £150,000 a year, and the company's top male star, Chris Evans, pocketed more than £2.2 million a year. This dwarfed the salary of Claudia Winkleman, the BBC's highest-paid female presenter, who earned less than £500,000.

In an effort to minimise these disparities, large organisations of more than 250 employees across the private, public and voluntary sectors will be required to publish data about their gender pay gaps by April 2018.

Government timeline for mandatory reporting

The annual obligation to release gender pay information comes at a time when organisations are already preparing for large-scale compliance overhauls for the GDPR, MiFID II and other upcoming regulations.

So what can organisations do to smooth the reporting process?

KPMG has published a five-step plan to help businesses comply, but let's first take a look at how long preparing for gender pay gap changes will take.

April 2018 is the final deadline for publishing this information for the first time - although some organisations have already released their figures.

For example, PwC and Deloitte reported their findings in June and July, respectively. The former announced a mean pay gap of 13.7 per cent, while the latter revealed an 18.2 per cent difference in salaries between men and women.

However, private sector enterprises have had longer to prepare for the changes. A consultation was launched in February last year for businesses, while a similar process for public sector organisations was only initiated in August 2016.

Preparing for compliance

So how long should it take for departments to comply with mandatory reporting? Apparently, it depends on whom you ask.

Analysis from the Government Equalities Office claimed that it would take a pair of human resources (HR) managers two hours each to familiarise themselves with their obligations and a further two hours to complete training to abide by the new rules.

The Chartered Institute of Personnel and Development (CIPD) told a different story. Its research found that over half of HR managers thought it would take up to six months to comply, while 30 per cent believed six to 12 months was a more realistic timeline.

KPMG agreed with the CIPD analysis, claiming it accounted for wider issues outside of simple technical and regulatory considerations.

A five-step process to compliance

Some organisations will already be well underway in preparing for their first annual publication of gender pay gaps, if they've not released the results already.

However, for those that aren't, KPMG has published a five-step plan for gender pay compliance:

1. Get the right systems in place

Gender pay data is based on gross hourly rates, which are worked out by dividing weekly pay by weekly basic paid hours. Some payroll systems may not be set up to record information in this way, so the first step organisations must take is to adjust their software and manual processes to identify the number of hours employees work.

Certain pay elements are also excluded, such as overtime and expenses, which means businesses must be able to separate out hours that aren't relevant to regulatory requirements.

2. Become familiar with the necessary calculations

KPMG highlighted five factors that organisations must consider when isolating the data they need for gender pay gap reporting:
  • The elements of pay and bonus that are covered within the regulations;
  • Which employees are included;
  • The relevant time periods for reporting;
  • How to calculate gross hourly rates; and
  • The complexities that are added for 'group' organisations that are reporting.  
Bonus pay information must be included in calculations, as well as reported separately over the necessary 12-month periods.

3. Perform a trial run

Carrying out a test of systems and processes will ensure everything is running smoothly and allow businesses adequate time to make essential adjustments.

A dummy run also gives organisations an idea of what their gender pay gap is. Many enterprises may not even be aware there is a disparity in pay, so practising reporting procedures can help organisations begin to understand areas where they need to improve ahead of publication.

4. Identify and examine underlying issues

Organisations with large gender pay gaps are not only less attractive to prospective job candidates, customers and clients, but they may also suffer from low morale and negative press coverage.

Following a trial run, it is important to look at the underlying problems that could be causing pay gaps. Common drivers for salary differences include:
  • Recruitment practices;
  • Organisational culture;
  • Salary negotiation procedures;
  • Promotion decision processes; and
  • Flexible working options.
Before the official publication of data, enterprises may want to seek professional advice on improving gender parity, as well as evaluate their future recruitment needs to address any imbalances.

5. Publish the final report

The final data must be either reported directly to a government department or published prominently on the organisation's website. A director or equivalent employee also needs to sign off on the report.

Businesses should consider a number of variables ahead of the release, such as the timing of publication, getting the narrative right and managing internal communications. Any organisations reporting a fairly significant gap will want to take as much control over the release as possible to minimise brand damage.

While gender pay reporting isn't the biggest compliance issue that organisations may be facing over the next couple of years, it remains an important regulatory obligation.

If you need help strengthening your compliance teams for this and other tasks over the coming year, please contact a consultant at Barclay Simpson for more information.

Our 2017 Compensation and Market Trends Report combines our review of the prevailing conditions in the compliance recruitment market together with the results of our latest employer survey.

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