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Large firms will have to include bonuses in gender pay reporting, says UK prime minister


Bonus payments will be covered by new rules requiring large UK organisations to publish the difference between the average pay of their male and female employees, the prime minister has announced.

The requirements will also be extended to cover public sector organisations with 250 employers or more, as well as private and voluntary sector employers, according to the announcement. It comes ahead of the release by Lord Davies of his final report on female participation on corporate boards, which is expected later this week.

Steven Cochrane, an expert in employment law issues in the financial services sector at Pinsent Masons, the law firm behind Out-Law.com, said that financial services firms would be paying particular attention to the latest announcements.

"Total compensation packages within the financial services sector often contain a significant variable element, with bonuses for senior employees often being in excess of base salaries," he said.

"The confirmation that bonuses will need to be included in organisations' gender pay disclosures seems to suggest that the regime will have 'teeth', rather than just requiring a very generic and potentially meaningless disclosure of basic salaries across the workforce. While base salaries are typically transparent and operate within some form of banding system, discretionary bonus awards typically operate in a more opaque manner where individual managers make awards against a backdrop of performance metrics which can sometimes be viewed as subjective. In light of this, variable compensation such as discretionary bonus awards can become fertile ground for gender pay disparity," he said.

The previous coalition government announced plans to require organisations with 250 employees or more to publish the difference between the average pay of their male and female employees in March. Further details on what figures should be published and how often, and whether employers should be required or allowed voluntarily to publish contextual information alongside the figure will be announced shortly, as part of the government's response to a consultation on these questions which closed in September.

Equalities minister Nicky Morgan said that the gender pay gap, representing the difference in average pay earned by men and women, was now at its lowest level "since records began". Paying people different amounts for equal or similar work has been illegal for over 40 years, but an average pay gap of 19.1% exists particularly among older workers, reflecting "the types of jobs that women tend to enter, and the levels of seniority they progress to", according to the UK government.

Steven Cochrane said that the inclusion of bonuses within the reporting regime "points to a more robust pay-reporting regime than some had envisaged". However, "a number of critical questions" would remain open until the government published its consultation response and final regulations, he said.

"It remains to be seen whether the compensation breakdown will be by reference to the workforce as a whole, or whether it will need to be compartmentalised having regard to grade or function," he said. "Similarly, it remains to be seen when, where and how often the data will need to be provided, and whether there will be a statutory requirement on employers to contextualise the data with some form of narrative."

"Most employers would want to contextualise information in this way in any event, rather than allowing the numbers to stand on their own and for readers to draw their own - possibly wrong - conclusions," he said.

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