19 July 2023
As Irish organisations prepare for the second year of gender pay gap reporting, this year they will not only have to report again on their gender pay gap, but also on what they’re doing to address it since the last report. Aoife Newton of KPMG Law and KPMG colleague Andrew Egan assess the lessons from year one reporting, the impacts for those unable to demonstrate progress in closing the gap and how businesses can prepare for the second year.
Gender pay gap reporting became a reality for organisations with more than 250 employees 12 months ago. Having waited several years for the legislation, the regulations were published last June with a reporting deadline in December.
That short timeframe was challenging enough, but the scope and complexity of the reporting requirements were unexpectedly onerous. It had been expected that the Irish legislation would closely follow the UK model, but this was not the case.
In the UK, organisations are required to report on six different metrics, in Ireland they must report on those as well as an additional five. There were also issues with some of the guidance documents produced which were not always consistent.
Aoife states, “We provided a bespoke service to clients to help them produce compliant reports by the December deadline.”
“Part-time and temporary employees must be included and staff out on long-term sick leave or maternity leave as well as those who have joined the organisation shortly before the June snapshot date are also covered. That presents challenges for several reasons,” says Andrew.
In the first instance, it can be difficult for organisations to keep track of people who are on unpaid leave. Moreover, Gender Pay gap reports look at hourly pay and only that which is paid by the employer.
In the case of an employee on maternity leave where the employer is topping up the social welfare contribution to full pay, the social welfare element is not included in the calculation. That has the effect of artificially depressing that employee’s hourly rate of pay for the year in question.
It can be very difficult for employers to accurately reflect periods of unpaid leave such as parental leave, unpaid sick leave, and unpaid carer leave. The information is often stored within the HR systems and not available to payroll.
Andrew notes, “Where such periods of leave are not reflected, once again, this depresses the hourly rate of pay. At present, females are more likely to take periods of unpaid parental and care leave which can result in increased Gender Pay gaps where not correctly reflected. Hopefully, we will see more males taking it as time goes on and that it will eventually equalise.”
“In the UK, it is much clearer and more straightforward,” Newton points out. “Employees not in receipt of full pay are excluded, for example.
Also, the report is based on a single payslip for the period which includes April 5th. In Ireland, all employees, regardless of whether they are full-time, part-time, temporary, or on leave must generally be included and the reporting period covers 12 months.”
“There is an awful lot of data to collect, and it is not necessarily readily available.”
Andrew Egan, KPMG in Ireland
That presents quite cumbersome data challenges. “There is an awful lot of data to collect, and it is not necessarily readily available,” Egan says. “The complexity of the reporting requirements doesn’t sit well with normal payroll systems. Payroll can provide a lot of valuable data, but it doesn’t cover things like bonuses paid using the small benefits exemption. Also, many payroll systems have no way of identifying employees who have left the organisation or are on long-term leave or short time working. That information tends to be held by HR.”
KPMG works with client organisations to gather the data from wherever it is held and put it into a form where it can be analysed and turned into usable information for gender pay gap reporting.
“We work with HR to get a full picture of all pay and bonuses and everyone’s employment status,” Egan continues. “We also have a data analytics tool which we can use to analyse their data and prepare a detailed review and report by age, location, seniority of employees, functions, job titles and so on. We can use the tool to slice and dice the data in a variety of ways and this can help to uncover the potential root cause of any gender pay gap identified.”
Identifying the causes of the gender pay gap is critically important, as Newton explains. “If an organisation reports a gender pay gap of 10 per cent, they need to know why that is the case. The legislation requires them to indicate what measures they propose to put in place to address the gap.”
Knowing the causes will certainly help with that.
“Comparisons are going to be made between last year’s report and this year’s.”
Aoife Newton, KPMG Law LLP
The narrative which accompanies the gender pay gap report is also crucial. “Reports are available to the public and it is obligatory that they include explanations for what’s happening and why. And because it is going to be published externally, senior management is likely to take a keen interest in its content and whoever is responsible for preparing it needs to be able to explain it to them.”
The accompanying narrative will be doubly important this year. “Comparisons are going to be made between last year’s report and this year’s,” Newton points out. “There is currently no legal requirement for organisations to make progress on closing their gender pay gaps, but there will be pressure from the public and employees to do so. And failure to show progress or make meaningful efforts to improve can cause reputational damage to an organisation and its employer brand.”
The KPMG team not only helps organisations to identify the underlying causes of their gender pay gap but also assists with the preparation of the narrative to accompany the report. This is not some PR exercise; it is about analysing the data to produce insights into the underlying causes of gender pay gaps where they exist and point to potentially effective remedial measures.
Looking ahead, Newton points out that the reporting threshold will reduce to 150 employees or more in 2024, and finally, to those with 50 or more in 2025. “It is not going away, but it will not apply to organisations with less than 50 employees. However, many businesses such as pubs, cafes, and corner shops with large numbers of seasonal and part-time staff may still be in scope for future reporting. The EU Pay Transparency Directive has been adopted and will have to be implemented by June 2026.
It will add further obligations such as preventing employers from asking job candidates about their pay history and requiring them to publish pay ranges in job ads. Our teams in KPMG and KPMG Law LLP are here to help organisations meet their obligations under current and future legislation and assist them in making progress on closing their gender pay gaps where they exist.”