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Comment: The secret’s out – the trend towards pay transparency


Over forty years ago, the Equal Pay Act 1970 introduced the legal requirement of equal pay between the sexes. Twenty years ago last month, the National Minimum Wage was introduced. In the second decade of the twenty-first century, legislation is moving towards ensuring not only the equality and adequacy of pay, but also its transparency.

Since April 2017, employers with 250 or more employees have been required to record and report their gender pay gap, in an attempt to decrease one of the highest such gaps in Europe. The EHRC reports that compliance is now at 100% (2018), suggesting that the process has quickly become embedded. The House of Commons’ BEIS Committee has since recommended the expansion of the requirement to employers with a headcount of 50 or more, though the Government has not accepted this recommendation to date.

However, the gender pay gap has proved to be only the first in a series of pay reporting legislation. In July 2018, the Companies (Miscellaneous Reporting) Regulations 2018 were published, requiring certain quoted companies with over 250 UK employees to report their CEO’s remuneration and that of employees at the 25th, 50th (median) and 75th percentiles. This is of interest not only for corporate governance, but because it will also effectively permit employees to locate themselves within the pay scale.

In a yet further development, in October 2018, the Government published its consultation into ethnicity pay reporting, describing transparency as ‘a vital step towards harnessing the power of a diverse workforce’. While the response to the consultation is awaited, employers should not necessarily expect a simple ‘cut and paste’ of the requirements of the gender pay gap legislation with which they may now be familiar. The consultation paper contemplates more granular reporting, in part due to the different challenges of showing distribution of pay amongst numerous ethnicities.

In spite of this emerging trend, the idea of pay transparency has not always sat easily with employers and one response has been the implementation of pay secrecy policies, forbidding discussion of salaries. Such policies might merely be described as a natural product of British cultural attitudes towards pay, which have long tended to discourage an open discussion of these matters. Certainly, not all countries treat the matter similarly, suggesting a cultural element; in Sweden, for example, individuals’ salaries can easily be obtained from the tax authorities, which some have cited as a reason for a relatively low gender pay gap.

Though British attitudes may be somewhat different, pay secrecy is not illegal under English law. Perhaps the closest that the law comes to a prohibition is section 77 of the Equality Act 2010, which renders pay secrecy terms unenforceable only in specific circumstances. In summary, this is when an individual asks about or shares details of pay in order to determine whether there is an issue of pay-related discrimination. Nevertheless, while not a blanket ban, section 77 does mean that those employers relying on pay secrecy terms or policies to try and conceal their discriminatory attitudes should not necessarily expect protection against questions from employees informed by gender or ethnicity pay gap information.

However, quite apart from the trend of this latest wave of legislation, which clearly promotes transparency, pay secrecy has increasingly become difficult to sustain and gives rise to a host of practical issues. For example, it is not hard to envisage that, much as the remuneration of corporate officers has come under increasing scrutiny from shareholders, employees’ pay (or its concealment) might become an ever-greater public relations issue. The signs are already present in the response to public-facing organisations such as the BBC, for whom a perceived lack of transparency has arguably led to increased public criticism.

Employers seeking to enforce a pay secrecy term (such as bringing disciplinary proceedings against an employee for breach) have not attracted a great deal of attention in the reported case law. Nevertheless, it is not hard to see that doing so might cause serious morale issues in the workplace, risk victimisation or discrimination claims, and attract negative comments in a Tribunal setting. Where handled poorly, requests for information are accompanied by demands for equal pay and could even give rise to issues of automatic unfair dismissal of an employee asserting their statutory rights.

With that in mind, forward-thinking employers would be well-advised to take heed of, plan for and be ready to embrace reporting requirements, even if they are not currently strictly applicable, so as to anticipate issues and (hopefully) demonstrate their positive approach and record of achievements in terms of equality and diversity.

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