Closing the Gender Pay Gap “Once and for All”: Labour’s Proposed Reforms to GPG Reporting in the UK



by Alex Patrick | Sep 4, 2024

The UK’s gender pay gap (GPG) has been declining over time, falling from 27.5% in 1997 to 14.3% in 2023. Nevertheless, at the current rate of decline, it will take at least another 20 years to close the GPG. In the lead-up to the recent election, then Shadow Chancellor Rachel Reeves promised that a Labour government would close the GPG “once and for all.” This ambitious pledge was backed by a series of policy changes outlined in Labour’s election manifesto, including amendments to the current GPG reporting scheme. While these reforms have the potential to address some of the key shortcomings in the current system, their success will depend on effective oversight and enforcement—neither of which are clearly addressed in Labour’s plan.

The 2017 Gender Pay Gap Information Regulations make annual GPG reporting mandatory for employers with 250+ employees. Employers report on four metrics: the gender pay gap, gender proportions in pay quartiles, the bonus pay gap, and the proportions of men and women receiving bonuses. This data, which is publicly-accessible, is intended to help employers understand the causes of their GPG. Lawmakers expected the risk of reproach from employees, investors, consumers and the media would persuade employers to implement targeted policies to address those causes.

Nevertheless, various studies, including our own, have highlighted limitations to the Regulations, which inhibit employers’ understanding of the causes of their GPG. Labour’s election manifesto includes a commitment to introduce legislation within the first 100 days to implement its ‘Make Work Pay’ plan. This plan includes three key reforms to GPG reporting, which may go some way toward addressing these limitations.

Firstly, employers will be required to include outsourced workers in their reports. Currently, employers only report the pay of ‘full-pay employees’, which excludes those who are self-employed and those in the gig economy. Organisations that rely on gig workers have benefitted from their usually cheaper labour while also disguising the impact of this practice in their pay reports. The inclusion of outsourced workers would therefore provide a more accurate picture of pay inequality within organisations reliant on their work. However, employers could circumvent this requirement by simply not relying on outsourcing in April, the month in which pay data are captured.

Secondly, Labour intends to introduce mandatory ethnicity and disability pay gap reporting alongside GPG reporting. As noted by the Fawcett Society, ‘women with multiple protected characteristics tend to experience greater gender pay gaps’, yet the Regulations do not currently give employers insight into the impact of employees’ intersecting characteristics on pay and career progression. Labour’s plans should allow employers to more thoroughly investigate the root causes of pay disparities, and ensure that additional barriers faced by employees with multiple protected characteristics are addressed. However, given that the previous government declined to introduce ethnicity pay reporting on the basis of challenges in developing an appropriate methodology for collecting and reporting data, the Labour government will have to consider carefully how this scheme can operate effectively.

Thirdly, employers will be required to publish and implement action plans to close their GPGs. Action plans are currently voluntary, and the Government Equalities Office estimates that approximately half of employers produced a plan to accompany their 2019 reports. Voluntary action is much more common among large, public-facing organisations at risk of scrutiny following the release of GPG data. For others, there is limited incentive for voluntary action, turning GPG reporting into a box-ticking exercise. Making action plans mandatory is therefore an important step forward. However, Labour must consider how to ensure that employers genuinely identify the causes of their GPG and commit to evidence-based actions that target those causes. Further, there appear to be no plans to sanction organisations that fail to implement their plans. The Equality and Human Rights Commission’s light touch enforcement action against employers who have breached the Regulations thus far does not inspire hope that it could also compel employers to reduce their GPGs.

While other limitations to the Regulations remain, these proposed reforms are a promising step forward. By including outsourced workers and introducing mandatory ethnicity and disability pay gap reporting, employers should gain a more comprehensive understanding of their pay gaps. However, the success of these reforms will hinge on employers’ implementation of robust action plans and effective enforcement mechanisms to ensure meaningful progress towards pay equality.

About Alex Patrick
Alex Patrick is a Lecturer in Law at Middlesex University, where she researches the role of pay transparency in eliminating pay discrimination.