What is diversity and pay reporting?
Pay reporting refers to the practice of reporting on wages within a business, usually to encourage employers to reward people fairly.
Diversity reporting refers to the practice of businesses disclosing certain information about their workforces. Diversity reporting generally focuses on the protected characteristics of staff members, such as gender, ethnicity, age and disability, and the respective wages of different groups. As such, diversity and pay reporting go hand in hand.
Diversity reporting aims to promote and increase transparency and accountability regarding diversity and inclusion efforts within businesses across the UK. Read Why diversity and inclusion are important at work to find out more.
What types of diversity and pay reporting exist?
Over the past few years, various mandatory reporting requirements have been introduced for certain businesses. These are gender pay gap reporting and CEO pay gap reporting. Certain voluntary diversity reporting initiatives also exist, which may become mandatory at a later date. These include ethnicity pay gap reporting and disability workforce reporting.
Gender pay gap reporting
Gender pay gap reporting was introduced in April 2017 under The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.
What is the gender pay gap?
The gender pay gap shows the difference between the average hourly earnings of men and women. The figure is expressed as a percentage of men’s earnings. For example, ‘women earn 15% less than men per hour’. If the data is used to its full potential, it can be a valuable tool for assessing levels of equality in the workplace, female and male participation, and how effectively talent is being maximised.
Are the gender pay gap and equal pay the same?
The gender pay gap is not the same as the right to equal pay.
The right to equal pay deals with the pay differences between staff members who perform the same role or ‘work of equivalent value’. It’s illegal to pay people unequally because of their gender, race, or ethnicity, or because they work part-time or are temporary staff. This applies to all employers.
The gender pay gap shows the differences in the average pay between men and women. If a workplace has an exceptionally high gender pay gap, this can indicate there may be some issues to deal with. Whilst the gender pay gap may include unlawful inequality in pay, this is usually only a small component of the aggregate data.
Who needs to report their gender pay gap?
Businesses with at least 250 relevant employees on 5 April each year (ie the snapshot date) must publish an annual gender pay gap report. Relevant employees that should be included in the report include:
partners in a partnership who receive a salary
members of a limited liability partnership (LLP) who are treated as employees for the purposes of payroll
For more information on how to work out who is a relevant employee for gender pay gap reporting, see the government’s guidance on who needs to report.
Businesses with fewer than 250 relevant employees are not required to publish a gender pay gap report. However, they can choose to do so voluntarily.
What does a gender pay gap report need to cover?
A business’ gender pay gap report needs to set out information about:
the overall gender pay gap for relevant employees - calculated using both the mean (ie average) and median (ie the number that is in the middle of a range when everyone’s salary is lined up from smallest to largest) average hourly pay
the proportion of women and men in each of the 4 pay bands - the distribution of male and female employees across different salary levels within a business (ie each band represents 25% of a business’ workforce based on their pay rates)
the gender bonus gap - the difference between mean and median bonuses paid to female employees compared to male employees
the proportion of male and female employees who received a bonus in the same 12-month period
Businesses also need to submit a written statement together with their report, confirming that the information in the report is accurate.
Alongside their gender pay gap report, businesses can also choose to publish:
a supporting narrative - to help anyone reading the report understand it
an action plan - to explain how the business plans to reduce their gender pay gap in the future
For more information on what a gender pay gap report must cover, read the government’s guidance on what to report.
When and where does a gender pay gap report need to be published?
Gender pay gap reports must be published annually, within a year of the snapshot date. This means that the gender pay gap reporting deadline is 4 April each year.
A business should publish its gender pay gap report on the government's gender pay gap reporting service website and in a prominent place on its website. For businesses without websites, the report should be published on the business’ intranet or its parent company’s website. Gender pay gap reports must be kept online for at least 3 years after publication.
For more information, see the government’s guidance on when to report.
What if a business doesn’t comply?
Not complying with mandatory gender pay gap reporting is unlawful and can have serious consequences. These include the Equality and Human Rights Commission (EHRC) taking action against non-compliant businesses, leading to court orders and fines. Reputational damage can also arise as any business that fails to file its report on the gender pay gap service will be ‘named and shamed’ with a ‘late badge’ visible to the public.
Executive pay gap reporting
Under The Companies (Miscellaneous Reporting) Regulations 2018, all public limited companies (PLCs) with more than 250 UK employees must disclose their executive pay ratios. This means that certain PLCs must report their Chief Executive Officer’s (CEO’s) most recent pay figure and their UK employees' full-time equivalent pay figure at the 25th, 50th and 75th percentiles.
These figures must be included in the PLC’s annual directors’ remuneration report, along with supporting information on how the ratios were calculated and why the data shows what it does.
Ethnicity pay gap reporting
The ethnicity pay gap shows the difference in the average pay between all UK ethnic minorities in a workforce compared to white staff. While businesses do not have to report on their ethnicity pay gaps, they can choose to do so to improve transparency. However, ethnicity pay gap reporting involves more complex data, so achieving transparency in this area tends to be more complicated than when reporting on the gender pay gap. As part of this type of reporting, consider calculating:
the percentage of each ethnic group per hourly pay band (ie all staff are divided into 4 bands based on their hourly pay, from lowest to highest)
the mean and median ethnicity pay gaps using hourly pay
the bonus pay gap
the percentages of employees in different ethnic groups in the business
the percentage of employees who did not disclose their ethnicity
For more information, see the government’s guidance on ethnicity pay reporting.
Disability workforce reporting
Disability workforce reporting refers to the practice of reporting on disability, wellbeing and mental health in the workplace. It is designed to help make workplaces more inclusive for disabled employees and employees with long-term health conditions. This voluntary reporting framework is predominantly aimed at businesses with more than 250 employees. However, anyone can take part.
The reporting framework recommends that businesses report on:
the actions the business takes to recruit and retain disabled staff (eg what workplace policies exist, what support is available and pay and workplace progression of disabled employees), and
the percentage of people in the business who consider themselves to be disabled or have a long-term health condition
For more information, see the government's guidance on voluntary reporting on disability, mental health and wellbeing.
Data protection and diversity reporting
When undertaking diversity and pay reporting, large quantities of personal data (ie data about individuals who can be personally identified from that data, such as names and information about race) are handled. As a result, it is crucial that businesses understand and comply with all relevant data protection obligations.
For more information, read Data protection and employees and follow our How to make a business GDPR-compliant checklist. Ask a lawyer if you have any questions or concerns and consider using our GDPR compliance service.