Pay Transparency Requirements in the UK and Europe: What Employers Need to Know

Quick Hits

• Public, private, and voluntary sector organisations with 250 or more employees in the UK, are required to report annually on their gender pay gap using a specified “snapshot date” of 31 March for most public authority employers and 5 April for private, voluntary and all other public authority employers.
• Organisations that fail to report on pay gaps risk reputational damage.
• The UK government plans to introduce disability and ethnicity pay gap reporting requirements and expand equal pay rights.
• The EU’s Pay Transparency Directive will also have implications for UK employers that have EU-based employees.

UK Gender Pay Gap Reporting

Each year, eligible UK organisations must carry out mandatory reporting on the average salary gap between male and female employees. Employers must report on six metrics: the mean and median gender pay gap, gender proportions in pay quartiles, the mean and median bonus pay gap, and the proportions of men and women receiving bonuses. The gender pay gap (GPG) data must be submitted to the Government Equalities Office and is made publicly accessible on the Gender Pay Gap Service website. Employers must also publish the data on their own websites but can choose whether to include a supporting narrative explaining their gender pay gap results, and whether to include an action plan to close any gender pay gap. Private and voluntary sector employers must also prepare a written statement confirming the accuracy of the data at the time it is submitted.

Organisations failing to report will receive a warning notice from the EHRC threatening formal enforcement action. If the failure amounts to a breach of the Equality Act 2010, further action may be taken, such as enforceable action plans or legal investigation. The EHRC is also authorised to request a court order to impose a fine on organisations that fail to provide reports. Nearly all the approximately 600 nonreporting businesses that initially received warning and reminder notifications from the EHRC in April and May of this year have now submitted their reports; however, the EHRC recently published the names of six businesses that failed to meet this obligation. No penalties or fines have been issued to date.

UK Reporting Reform

The King’s Speech, delivered in July 2024, set out the new UK government’s intention to introduce rights for equal pay and additional pay gap reporting. The details are expected to be included in the upcoming draft Equality (Race and Disability) Bill.

There is no set timeline for the progression of this draft bill, and it has not yet been introduced to Parliament. However, employers may want to keep abreast of any potential new obligations which may be introduced in the near future. Under the current proposals, employers with more than 250 employees would also face mandatory obligations to report wage disparities based on ethnicity and disability. The proposed bill will also introduce equal pay rights for ethnic minorities and disabled people, facilitating the ability for these individuals to bring unequal pay claims on these grounds. Currently, legislation in the UK only facilitates equal pay claims on the grounds of sex.

The EU’s Pay Transparency Directive

Despite the UK’s exit from the European Union, the EU Pay Transparency Directive and the mandatory requirements that apply directly to EU member states also have implications for non-EU employers that employ individuals in the European Union. These changes will establish market norms and will require companies operating in Europe to examine their internal processes, particularly with regard to recruitment and remuneration.

More information on the Directive can be found in our recent article, Preparing for the EU’s Pay Transparency Directive.

Ogletree Deakins’ global Pay Equity Practice Group and in-house data analytics team will continue to monitor developments with respect to global pay equity and pay transparency legislation and will provide updates on the firm’s Cross-Border and Pay Equity blogs as additional information becomes available.

Ellie Burston is an associate in the London office of Ogletree Deakins.

Lorraine Matthews is a practice assistant in the London office of Ogletree Deakins.