Source · Select Committees · Treasury Committee
Recommendation 20
20
Rejected
Paragraph: 107
Strengthen pay gap reporting regulations for firms with large gaps and reduce reporting threshold.
Recommendation
We therefore recommend that the Government strengthens the pay gap reporting regulations to incentivise firms to make faster progress. Specifically, we recommend it be made mandatory for firms with a pay or bonus gap above a certain threshold to publish a narrative explaining the drivers of the gap(s) and an action plan for how they will reduce them. We also recommend that the employer size threshold for pay gap reporting be reduced from 250 employees to 50 employees, at least for firms in financial services given the extent of the problem in this sector.
Government Response Summary
The government rejects both recommendations to strengthen pay gap reporting. It states it is too soon to make changes and argues that mandatory action plans for firms with high gaps would be unfair, ineffective, and burdensome, while reducing the reporting threshold to 50 employees poses statistical and practical challenges.
Paragraph Reference:
107
Government Response
Rejected
HM Government
Rejected
We agree with the Committee that reporting alone will not reduce the gender pay gap and that employers need to take action; however, in line with the conclusions of the post-implementation review of the reporting regulations, we believe it is too soon to make changes to the requirements. On the specific recommendation regarding mandatory action plans for specific subsets of employers, we do not believe it would be fair or effective. There are many causes of the gender pay gap and employers should look at the causes in their own workforce to identify how best to tackle them. Introducing mandatory action plans would increase the burden on businesses and risks creating nothing more than a tick box exercise. Furthermore, tying additional mandatory action to the size of an organisation’s gap risks targeting the wrong organisations, given that the size of an organisation’s pay gap may not accurately reflect the efforts they are making to close it, but instead broader trends. For example, the Committee heard from organisations in the sector who have introduced significant initiatives and changes. However, their data is still impacted by the wider lack of gender diversity across the sector. It would be unfair to expect organisations in these circumstances to repeatedly account for their data, while organisations with lower gaps, purely by virtue of the sector they operate in, are spared this additional level of accountability. With regard to the threshold of 250 employees, this number is set within the primary legislation and crucially aligns with more widely adopted definitions of a large employer. While we recognise the importance of encouraging action to close the gap by smaller organisations, there are statistical and practical reasons why introducing mandatory reporting for these organisations may not be the best route. Reporting on such a small number of employees is inadvisable as individuals may become identifiable in the figures. Furthermore, the figures become exceptionally sensitive to individual staff moves, making them prone to large fluctuations and less reliable as the basis of trend level data. While we have made efforts to reduce the burden of reporting for organisations, it is still an additional task which, for a smaller organisation, can require significant resource. Given that HR and pay and reward functions in these organisations are likely to be limited, we believe their time is best spent embedding interventions which have proven to be effective at closing the gap.