As EU member states prepare for the EU Pay Transparency Directive, the UK has dispensed with hundreds of EU-derived laws under its Schedule of Retained Law. What does that mean for equal pay protection and UK gender equality?
Below, we explore the impact of Brexit and equal pay, and consider whether the UK will experience a ripple effect from the EU Pay Transparency Directive.
The current state of the UK’s Gender Pay Gap
Figures from the UK’s Office of National Statistics (ONS) show a gender pay gap of 14.9% among all employees. That drops to 8.3% among full-time employees, up from 7.7% in 2021.
Meanwhile, a study by BDO reveals the median hourly gender pay gap has fallen from 13.21% in 2017 to just 12.07% in 2022. In the same period, the mean hourly gap fell from 15.07% to 12.97%.
At current rates of progress, it will take 63 years to close the UK’s median hourly gender pay gap and 37 years for the mean hourly gap. Financial services, construction, technology, mining and quarrying, scientific and technical, and education and professional report the biggest gender pay gaps.
In 2017, the UK took the lead in gender pay gap reporting, but current legislation falls short of the EU Directive:
UK employers are required to report and publish gender pay gaps if they employ over 250 employees.
In April 2023, the UK introduced voluntary ethnicity pay gap reporting but critics claim it doesn’t go far enough. 2022 data found that businesses won’t know their own ethnicity pay gap until 2051 unless it is made mandatory.
Current legislation lacks sanctions or penalties, and there is no obligation to act to close gender pay gaps.
Uniquely, the UK also faces a class pay gap. Research shows that people in the UK with working class origins face an average pay gap of £6,718 (13%). That means they effectively work one day in every seven for free. Only three UK organizations currently report on the class pay gap, which is not required by law.
Salary transparency also fell to a 7 year low in April 2023. Data from job search engine Adzuna reveals that just 51.5% of UK job postings disclosed salary. That compares to 61.4% just a year before. August 2023 updates show a further fall to 50.1%.
Brexit and equal pay: Reassurance over “single source” provision
While the UK government has promised not to water down UK gender equality post-Brexit, concern exists over its “single source” provision.
According to UK law, men and women in the same employment performing equal work must receive equal pay, unless differences can be justified. An EU provision, the single source test, helps women to act against employers if they face pay discrimination.
The test allows women to claim equal pay for equal work if employment terms and conditions are set by the same “source”. Single source provision forms the basis of several equal pay claims in the UK. High profile cases include equal pay claims against high-street retailer Next, supermarket chain Tesco, and Birmingham City Council. The largest local authority in Europe, Birmingham effectively declared itself bankrupt over equal pay claims in September 2023.
A spokesperson for the government’s Equality Hub has since stated, “There will be absolutely no reduction in equal pay protections.” Equality Ministers have pledged to replicate the “single source” provision through secondary legislation before the end of 2023.
Uncertainty over UK employment laws
Will the UK experience an EU Pay Transparency Directive “ripple effect?”
Accurate predictions are difficult. The next UK General Election is due no later than January 2025, and a change of government could see sweeping updates to UK employment laws. Opposition leaders point positively to the Labour Party’s proposed New Deal which includes the following:
Ethnicity and disability pay gap reporting will be mandatory for employers with over 250 employees.
A range of measures will be introduced to close the gender pay gap. These include requiring large firms to “develop, publish, and implement action plans” to close their pay gaps and include outsourced workers in pay data reporting.
Commit to closing the gender pay gap
UK law firm Boyes Turner suggests that the UK government will be influenced by the “more punitive measures” of the EU Pay Transparency Directive. But UK employers don’t have to wait for legislation to implement strategies to close the gender pay gap.
UK employers with large EU-based operations will be required to comply with the EU Pay Transparency Directive. Those employers may choose to adopt EU equal pay principles across all their operations, for consistency.
All organizations can implement strategies to create a culture of pay equity, for instance:
Publish pay ranges in job advertisements. Pay transparency attracts more qualified candidates to job postings, enhances employee engagement, and motivates employees to work harder.
Take steps to close the gender pay gap by analyzing and publishing ethnicity pay gap reporting. Include the class pay gap if appropriate.
Adopt key principles from the EU Pay Transparency Directive. Start with a goal to reduce the gender pay to 5% and create an action plan to achieve it.
Carry out an intersectional pay equity audit. Trusaic PayParity helps organizations to identify areas accurately identify pay disparities and identify risk areas for remediation.
Trusaic is GDPR compliant and can assist any organization in any EU state or UK in meeting its obligations under the EU Pay Transparency Directive.
Conducting a pay equity audit is a key component to ensuring equitable compensation within your organization. Just as important as the analysis is how you communicate findings and progress with various stakeholders. Download The Pay Equity Communications Planner to learn best practices for discussing compensation, both internally and externally.