Gender pay gap reporting in Ireland – regulations finally published

This insight has been updated and, in part, superseded by our insight dated 20 July here.

This article sets out what the Employment Equality Act 1998 (section 20A) (Gender Pay Gap Information) Regulations 2022 (the Regulations) say and what employers need to know when doing their gender pay gap reporting.

What statistics do employers have to report?

As we reported last month, employers have to report the following key gender pay gap statistics:

• mean and median pay gaps;

• mean and median bonus gaps;

• the proportion of men and women that received bonuses;

• the proportion of men and women that received benefits in kind; and

• the proportion of men and women in each of four equally sized quartiles.

These statistics must be contained in a report published no later than six months after the “snapshot date” (any date in June 2022 that employers choose).

Mean and median pay gaps are calculated by first working out hourly rates. The Regulations set out in detail the process for doing this.

How should employers calculate hourly rates?

To calculate hourly rates, employers need to identify all ordinary pay and bonus paid to employees during the “relevant pay period” – this is the period of 12 months ending on the snapshot date.

Any ordinary pay that was paid during the relevant pay period, but which relates to work done outside of the period, must be excluded. Examples will be advances of pay or corrections of underpayments. Any bonus payments that do not relate to a 12-month period must also be adjusted.

This total of pay and bonus must then be divided by the total number of hours worked in the relevant pay period.

Adjusted bonus payments

Any bonuses that were paid to employees in respect of a period other than the full 12 months must be adjusted. This is done by dividing the bonus payment by the number of days that it relates to, then multiplying that figure by the number of days in the relevant pay period.

This could lead to some strange results in practice. For example, consider someone paid €36,000 a year and receiving quarterly bonus payments of €1,000. Dividing each of these quarterly payments by 91 (the number of days in a calendar quarter) and multiplying by 365 means that they will be treated as having received four payments of almost €4,000, thereby increasing the adjusted bonus payments by up to €16,000. This will have the result that the total remuneration used to calculate their hourly rate has increased by 44% to €52,000. Calculations will assume that the bonus for this individual makes up 30% of their total remuneration, whereas in reality it is just 10%. If the same employee had received an annual bonus of €4,000 instead of four quarterly bonuses of €1,000, they would have a lower hourly rate since it would be calculated from just €40,000 instead of €52,000.

The impact of this, based on our experience of gender pay gap reporting in the UK, is that men tend to be in the majority in bonus paying roles (eg, in sales). Adjusting the bonus in this manner means that it will falsely inflate hourly rates for men, thereby increasing the pay gaps.

Additionally, and rather unhelpfully, the Regulations do not expressly set out how long in days it considers the “relevant pay period” to be, only that it is 12 months long. Does this mean that calculations in every leap year need to be multiplied by 366 days? While it is unlikely to make much difference to overall gaps, it is an important technicality for employers to be aware of.

What mean and median pay gaps must employers report?

Employers must report three sets of mean and median pay gaps:

• The first is simple: a gap calculated from all employees’ pay data.

• The second is the gap just between part-time employees ie, the mean/median gap between a part-time woman and a part-time man.

• The third is the mean/median gap between a woman on a temporary contract and a man on a temporary contract.

“Part-time” has the same meaning as in Part 2 of the Protection of Employees (Part-Time Work) Act 2001. This definition covers employees whose normal hours of work are less than the normal hours of work of an employee who is a comparable employee.

There is no definition (in either the Regulations or the guidance) covering how employers should define a “temporary” contract, but our view would be to include anyone who is not on a contract of indefinite duration (ie, on a fixed-term, or specified purpose contract). This will undoubtedly result in an overlap, in that many employers may have employees who work part-time and full-time on temporary contracts, because the Regulations and guidance do not say that these employees should be excluded from the other categories. As such, it’s unclear what value this information will provide.

What else must employers include in reports?

Besides the key statistics, the report needs to contain a written statement setting out the reasons for the differences in remuneration (ie, the causes of the gaps) and what measures (if any) are being taken, or proposed to be taken, to reduce the gaps.

Gender pay gap reports must be published on an employer’s website or, if it does not have a website, in a place where employees and the general public can access it. Reports need to be accessible for three years from the date that the data is published.

What is ordinary pay?

The definition is very similar to the one contained in the UK gender pay gap reporting regime.

Pay is defined as being basic pay, allowances, piecework pay, shift premium pay (ie, extra pay for working anti-social hours), and overtime pay. Redundancy and termination payments are excluded from the definition, as is any form of remuneration provided in any other form than money.

Pay is defined as being “before any statutory deductions are made”. As salary sacrifices are not “statutory” deductions, this implies that the amount of pay used in the calculation must be after any sacrifices are removed. Although salary sacrifices are relatively uncommon (they tend to be applied only to travel passes, share purchases, or the cycle to work scheme), this is an important point for employers to remember.

“Ordinary pay” does not expressly include pay for leave, such as holiday pay, sick pay or maternity/paternity pay. However, the recent guidance states that this should be included.

“Allowances” has a broad definition. It covers any payments made in relation to ancillary duties of the employee (eg, for being the fire safety warden, or a first aider), for travel, car allowances, “recruitment and retention”, and the purchase of any other item relating to their employment (for example, a mobile phone or laptop). It does not include expenses.

What is bonus?

“Bonus” has the same broad definition as in the UK gender pay gap reporting regime. It is very broad. It covers money, vouchers, shares, share options or interests in shares, relating to profit sharing, productivity, performance, incentive or commission. Essentially, anything paid to an employee (which does not fall into the ordinary pay definition) could be capable of being a bonus.

It is the reason for the payment that matters, not what it is named. This is an important point where employers can get gender pay gap reporting wrong. A “special bonus” paid to an employee for working anti-social hours might actually be an allowance. An allowance paid to incentivise against sickness absence might be a bonus. Facts are important, not names.

Any bonus paid in shares is deemed to be paid to the employee when the shares are issued. The amount of bonus is deemed to be the value of the shares when issued. For things like restricted stock units, this means it is the date that shares vest that is important (not the date of the initial grant).

Who counts as an employee?

The Regulations cover “relevant employees” and calculations must be made only using those employees who were employed on the snapshot date. Bear in mind that the definition of an employee under the Employment Equality Act 1998 (EEA) includes contractors who are engaged personally to execute work or a service, and the EEA also expressly includes partners. As such, individual contractors and partners should be included as employees for the purposes of gender pay gap reporting.

What hours should be used in the calculations?

The hours to be used in the hourly rate calculations should be:

• the hours stated in the employee’s contract of employment;

• where the employee’s hours are not fixed or differ from week to week, the total hours worked over the last 12 weeks must be divided by 12 and multiplied by 52.14 to get an average hours per week. Or, if the employee has worked for less than 12 weeks, or if it is not reasonably possible to calculate a 12-week average, another number that fairly represents the hours in a year should be used.

This 12-week averaging is a deficiency in the UK gender pay gap reporting regulations that, sadly, has been carried over by Irish legislators. It has proven to be problematic and rarely results in a fair or accurate hourly rate figure for employees with variable hours.

For example, an employee with variable hours may have worked 10-15 hours a week for most of the year but because of a seasonal surge in work, worked 40 or more hours a week for a few months. This means that their total pay over the 12-month pay period would be low, but their average hours over the 12-week period of more intense work would be high. Overall, this would make their hourly rate calculation very low and completely misrepresentative.

In the UK, many employers instead use the actual hours worked, an approach endorsed by ACAS guidance. This is because it makes no sense to use anything other than this when employees are already being paid according to an hourly rate. Employers in Ireland may wish to take a similar approach, but it is unclear if the Regulations would allow this. This was not covered by recent guidance.

What are benefits in kind?

This has a very broad definition. It is “any non-cash benefit of an estimated monetary value”. This is the same definition as found in the recent guidance. This guidance also stated that this would include the provision of a company car, voluntary health insurance, stock options, or share purchase schemes.

The latter two – stock options and share purchase schemes – will sometimes be capable of providing a cash benefit. If these are offered on a discount scheme (ie, employees are able to purchase shares at 20% less than market price), and this discount is taxable, our view is that this is better considered as being a bonus rather than a benefit in kind. This is also within the definition of “bonus” provided in the Regulations.

There is no de minimis requirement for something to count as a benefit in kind. Whether benefits such as free tea and coffee in the workplace count as “benefits in kind” is unclear. A good measure for employers to use might be to only count those benefits in kind that are taxable benefits, until this is clarified by the Department of Children, Equality, Disability, Integration and Youth.

How is the headcount calculated?

An employer must report their gender pay gaps if, on the snapshot date, they have 250 employees or more.

This means if an employer’s headcount exceeds the 250 threshold during June, but was lower at some earlier point in June, it will not have to report its gender pay gap. It could choose as its snapshot date the earlier point in June when it was below the threshold and so not be required to report for 2022.

How are people on sick or family leave included in gender pay gap calculations?

Unlike UK gender pay gap reporting, there is no mechanism for excluding people whose pay was reduced because they were on some sort of leave, such as sick leave or maternity/paternity leave. This means that they must be included alongside all other employers when calculating all statistics.

That said, the Regulations require that when looking at the number of hours, no account should be taken in relation to those weeks where no work was done. Since no work is done while someone is on sick or maternity leave, this might mean that these weeks should be ignored. However, this section appears to relate more to variable hours employees, rather than those on some sort of leave.

Our view is that those on sick leave, maternity/paternity leave, or any other sort of leave must be included in the gender pay gap calculations along with all other employees. This will obviously distort the figures since some of these employees will be receiving little or no pay, but it can be explained in the employer’s report accordingly. A simple way that employers can understand the impact of these individuals on their pay gaps would be to calculate gaps that both include and exclude these individuals, and perhaps report both sets of figures.

How are the other gender pay gap statistics calculated?

These are relatively straightforward.

• Mean and median bonus gaps: add up all bonuses each employee received during the relevant pay period, find the mean or median for women, then subtract from the mean or median bonus for men, then divide by the mean or median bonus for men.

• Bonus proportions: identify all women who received a bonus, then divide by all women. Repeat for men.

• Benefit in kind proportions: as above, but with benefits in kind.

• Quartiles: order the workforce by hourly rate, split into four equally sized chunks, then identify the proportion of men and women in each quartile. Where there are men or women who straddle a boundary, allocate them as proportionately equally as possible across the quartiles.

For help with gender pay gap reporting in Ireland, contact us.