Pay Transparency Directive: how will gender pay gap reporting in Ireland need to change?

Although we’re only in the second year of gender pay gap reporting in Ireland, it’s likely that our legislation will need to change in order to be compliant with new requirements under the Pay Transparency Directive. As the Pay Transparency Directive will need to be transposed in Ireland within the next three years, employers should be watching out for any changes in the legislation before then.

Gender pay gap statistics by category

The Pay Transparency Directive requires that employers report:

• Mean and median pay gap
• Mean and median bonus gap
• Proportion of men and women receiving a bonus
• The proportion of men and women according to quartile pay bands.

Currently, the Irish Regulations already oblige employers to report on these statistics and go further by requiring them to also report proportions of men and women receiving Benefits in Kind (BIK), as well as mean and median pay gaps for part time and temporary employees.

However, as we set out in our article, the Pay Transparency Directive will now require employers to calculate and report gender pay gaps broken down by “categories of workers” who perform the same work or work of equal value. The Irish Regulations will need to be amended to require employers to also publish this additional information.

The challenge for employers is that identifying which employees fall within the same category is not always straightforward. Whereas many public sector employers operate structured job evaluation schemes with different roles being analysed, scored and placed on a transparent grading or levelling system, this is much less common in the private sector. Roles will need to be categorised so that those with the same “skills, effort, responsibility and working conditions” are grouped together. Regulations and guidance will be necessary to make clear how employers should do this. Developing and applying a job evaluation scheme is a specialist process that some employers will not be familiar with and may find tricky to navigate.

Getting the categorisation right is important. The statistics that must be calculated and reported will identify any equal pay issues and provide an opportunity for employers to address them. Including the wrong employees in a category could obscure any real problems (preventing employers from spotting them and putting them right), or could suggest problems that may not actually exist (if people who are not doing the same work and not getting paid the same are grouped together, there might be a misleading large gap).

The most pressing reason to get the categories correct is because where the gaps within these categories are greater than 5%, employers will have to demonstrate to workers’ representatives that there are reasons for the difference that are not discriminatory. If employers cannot agree this with representatives, it could prompt a more wide ranging “joint pay assessment”. Essentially, this is an equal pay audit that will need to be carried out in cooperation with workers’ representatives.

Benefits in Kind (BIKs) in gender pay gap reporting in Ireland

The Pay Transparency Directive says that “any benefits in addition to the ordinary basic or minimum wage or salary, which the worker receives directly or indirectly, whether in cash or in kind, should be taken into account” and the definition of “pay” expressly includes consideration “in kind”. Including the value of BIKs might have a big impact on the overall statistics. The current definition of BIKs in the Irish regulations is very broad: “any non-cash benefit of an estimated monetary value”, which means that potentially anything could be a BIK (e.g. the provision of a gym or a free/subsidised canteen).

Currently, BIKs only factor into the data collection in a binary way. Employers must report the proportion of men and women that received any BIK – the value of the BIK is irrelevant. This means that someone receiving €1m of life assurance counts just as much towards this statistic as someone receiving €2 worth of free coffee. With the value of BIKs having to also factor into the pay gap statistics, employers will have to figure out the value of the BIK that the employee is receiving.

This presents a challenge because BIKs can be hard to value. Legislation and guidance will need to clearly set out what the appropriate amount to include in the calculations will be for gender pay gap reporting purposes. Building on the previous example, what would be the appropriate value of the life assurance – the amount that it is worth (in the event of the employee’s death), the amount that it costs the employer, or the amount that the employee would have to spend to buy it themselves? Where BIKs are already taxable benefits, there should already be ways of identifying an appropriate amount. There is already some clear guidance from the Revenue about how to do this but whether it’s the Revenue amount that should be included for pay gap reporting purposes remains to be seen.

Headcount thresholds for gender pay gap reporting in Ireland

Currently in Ireland, only employers with 250 or more employees have to publish gender pay gap reports. By 2025, this threshold will drop to just 50 employees, and these will have to report annually. The Irish Regulations will comply with the Pay Transparency Directive’s ultimate threshold long before the latter takes effect: under the Pay Transparency Directive, employers with 100 or more employees will have to report every three years, with only employers with 250 or more employees reporting annually. It remains to be seen whether the Irish regulations will reduce the threshold and frequency of reporting to align with the Pay Transparency Directive.

Confirming the accuracy of the gender pay gaps

The Pay Transparency Directive will require the accuracy of pay gaps to be confirmed by an employer’s management, with employee representatives also being given an opportunity to interrogate the methodology used. Currently, the Irish regulations do not contain any obligations for employers to confirm the accuracy of the statistics, nor the right for employees (or their representatives) to interrogate the methodologies used.

On the representation point, in order to properly enact the Pay Transparency Directive, Irish legislation will have to be amended to include the rights of employee representatives and also to outline what is to happen if there is no existing representative body in the workplace. This will likely include the right to elect appropriate representatives, then set out their rights to ask questions. Essentially, this right provides a mechanism for someone to “check your homework” in a way that doesn’t exist at the moment, meaning that employers will want to be extra certain that they have followed the regulations and calculated their statistics accurately.

The new requirement for someone senior within the employer to vouch for the accuracy of the statistics will also present an additional practical requirement for employers in order to meet their gender pay gap reporting obligations in Ireland.

Definition of employee for gender pay gap reporting

The Irish Regulations currently use the Employment Equality Act 1998 definition of employee. This is broader than just those in an employment relationship and includes those carrying out “personal service”. Although it hasn’t been expressly confirmed in either the guidance or FAQs, and remains a point of some uncertainty, this definition could include self-employed contractors. On this point, the preamble to the Pay Transparency Directive provides a non-exhaustive list of examples of worker which includes “on-demand workers” and “platform workers” (albeit subject to the fulfilment of relevant criteria).

Whether platform, or gig economy, workers are included currently will depend upon the precise nature of the relationship. If there is no requirement for personal service, they will fall outside of the scope. However, the broader definition contained in the Pay Transparency Directive suggests that this may need to be looked at more closely and gig economy employers in Ireland will need this to be made clear by guidance and FAQs.

For more on this subject, read our analysis of the Pay Transparency Directive and gender pay gap reporting in Europe.

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