How to tackle gender pay gap reporting

Businesses with more than 250 employees will have to calculate their gender pay gap for the first time this June and publish reports by the end of the year, as a result of the passing of the Gender Pay Gap Information Act 2021.

Reports must include details of the average and median hourly wage gap, as well as data on bonuses, and average and median pay rates for part-time workers and people on temporary contracts.

The average pay gap will reflect the entire salary range in an organisation, while the median wage gap will exclude unusually high earners. The portion of male and female workers in various pay bands will also be included.

Employers will have to issue a statement on the reasons for their pay gap and the measures planned to reduce it, and there are plans for an online reporting system by next year.

The reporting requirement will extend to employers with 150 employees or more in 2024, and those with 50-plus staff from 2025.

Deadline dilemmas

Companies and their advisers are concerned about the tight June-to-December timescale for reporting pay data, says Aoife Newton, who leads KPMG’s gender pay gap (GPG) reporting services: ‘The timeline for reporting is very limited. Some employers may struggle with collating and analysing the correct data in order to report accurately by December of this year.’

The Irish Business and Employers Confederation (IBEC) points out that even though the bill was published in July 2021, guidance documents and FAQs for employers outlining the methodology and definitions were only published last month, noting that ‘given the complexities in reporting’ – formulae are detailed in the regulation – this ‘is a very tight turnaround time.’

Companies are required to choose a June ‘snapshot’ date and a December reporting date six months later.

Lessons learned

A key lesson from the introduction of the UK’s 2017 gender pay gap regulations ‘is that collating and reporting the requisite data may not be as easy as it might seem at first glance’, says Doone O’Doherty, people and organisation tax partner at PwC Ireland, while some companies have indicated that they may not have the necessary resources to handle this.

‘The most important thing for employers to do now is to check that their payroll and HR systems can deliver the data required, and then assess how much manual intervention will be needed to produce the relevant computations,’ O’Doherty advises, adding that PwC is continuing to seek government and representative body advice on computations.

Areas of difficulty identified by both PwC and IBEC include bonus payment assessments, where the methodology outlined in the regulations contradicts the guidance, and the treatment of periods of leave, whether unpaid, at reduced pay or full pay, which impacts the ‘hours-worked’ data included in computations.

Digging out the data

Dera McLoughlin, partner and head of consulting at Mazars in Ireland says that while compliance in the regulations’ first year may be a challenge, the data that underpins the calculations required is all held in the payroll or HR systems of an organisation.

The first step is for organisations to select their ‘snapshot’ date in June 2022. Then companies must extract, review and cleanse the data used for calculations. ‘There is certainly sufficient time if [an organisation] starts now but it will be very challenging if left until the last minute,’ says McLoughlin.

‘It involves a lot of decisions, such as identifying relevant employees for the purposes of the calculation and what are the relevant pay elements? How do you deal with unusual items such as overtime pay, allowances, leavers, pay in lieu of leave and so on?’

What’s it worth?

PwC analysis found that increasing women’s employment rates in Ireland to match Sweden’s could boost Irish GDP by US$56bn per annum or 12%, while closing the gender pay gap could boost women’s earnings in Ireland by US$3.95bn per annum or 8%.

The country’s leading body for women’s rights, meanwhile, wants the legislation to lay down penalties for companies that do not remedy gender pay gaps revealed by their reports. As well as the data, a report must give an employer’s reasons for any gender pay gaps and actions being taken (or planned) to eliminate or reduce them.

Describing the new law as ‘a positive step forward but not far enough’, Orla O’Connor, director of the National Women’s Council of Ireland, says one problem is delayed reporting for small businesses.

Her organisation’s research suggests that a majority of Irish women work in companies of 50 staff or fewer, which are currently not covered by the law.

She hopes the public reporting will force change, saying that ‘closing the gender pay gap makes economic sense for companies, as it will attract more women to work in the organisation’.

McLoughlin says companies have taken this onboard, as many organisations have been preparing by calculating their GPG in previous years, giving them time to ‘implement measures to address the gaps they noted before they had to report that gap officially’.

Financial challenges

‘Many expect that the first reporting results will not necessarily be positive for a large number of companies. However, it will provide them with an opportunity to review policies and strategies, and consider the challenges faced and actions required to ensure that the gap closes in the coming years,’ O’Doherty says.

However, while his members are ‘generally positive’ about the legislation, Neil McDonnell, CEO at Irish Small and Medium Enterprises (ISME), says that ‘on its own, this will not close the gender pay gap’, suggesting the interplay between low pay and the tax and social welfare system ‘represents an active encouragement to stay in low-paid jobs or in part-time employment’.

More positively, O’Doherty notes: ‘One of the key drivers of the gender pay gap is fewer women in senior roles. To create a strong pipeline of female talent, organisations need to identify and remove barriers to entry – and progression – for women at all levels.

‘Analysing recruitment and promotion data with a gender lens will help identify where in the process issues are occurring – at the attraction, shortlisting or selection stages – and inform actions.’