Equality Bill

My Lords, with permission, I will speak to Amendments 87 and 89, proposed by the noble Baronesses, Lady Warsi and Lady Morris, before turning to Amendments 88, 90 and 91 from the noble Lord, Lord Lester, and Amendments 89A and 91A from my noble friend Lord King. The noble Baroness, Lady Morris, has a fine record in relation to the gender pay gap. We all, throughout this Chamber, agree on the iniquity of the gender pay gap. What we do not agree on is the means by which to narrow the gap, which is something that we absolutely must do. Amendment 87 would introduce a new clause similar to a provision in the Equal Pay and Flexible Working Bill, introduced in this House by the noble Baroness last year. It would require only those employers found to have breached the equal pay provisions of the Bill to conduct a pay audit and publish the results. As the noble Lord, Lord Lester, said, it is rather like a punishment clause. We believe that in practice this amendment would make very little difference in closing the gender pay gap because very few equal pay claims succeed at tribunal. More are lost and many more are settled or withdrawn before reaching a tribunal. The latest figures from the Tribunals Service show that, out of the 20,148 equal pay claims disposed of by employment tribunals in the year to 31 March 2009, only 36 were successful at tribunal. Furthermore, Amendment 87 would not affect in any meaningful way obligations on the private sector, in which the vast majority of people in work are employed. Most equal pay claims that reach a tribunal involve public sector bodies, which already conduct pay audits. Often the results of these pay audits are the very reason that a case has been brought in the first place. Amendment 87 would also remove any discretion from tribunals. It would lead to them ordering pay audits where they might be inappropriate—for example, where the employer had recently conducted a pay audit or where there would be no benefit to other employees. Finally, the requirement imposed by Amendment 87 is indiscriminate. It would apply equally to small employers which may not have the resources to conduct a pay audit and to larger ones that do. As the noble Baroness said herself, there is no great enthusiasm in the business world for the proposals in the amendment, and I certainly urge her to withdraw it. I now come to Amendment 89—again, tabled by the noble Baronesses, Lady Morris and Lady Warsi. This amendment would make Clause 78 unworkable. I note the intention of the noble Baronesses to oppose the Question that Clause 78 stand part of the Bill, and I shall therefore explain briefly why the clause should stand part. The Government are committed to doing more to close the gender pay gap, but we can only effectively do so, particularly in the private sector, when regular publishing of pay gap information by individual employers produces greater transparency. To address the issue, we must first shine a light on it, and that is how the clause may come into play. I say "may" because the Government hope that we can get greater transparency through voluntary publishing arrangements. The Equality and Human Rights Commission has, at our request, been working with representatives from the business community, trade unions, the voluntary sector and other stakeholders to help to develop workable arrangements for gender pay publishing by non-public sector organisations, to be promoted on a voluntary basis. Its consultation seeking input from employers, unions and others about their preferred approach began in August and closed on 28 October last year. We expect publication imminently. I deeply regret that the commission has been unable to follow its press release of today with a report, and I shall certainly be seeking clarification on the reason for the delay. It is fair to say that the Government asked the EHRC to undertake the project, but the commission, with its stakeholders, has owned the project from its inception. I respectfully point out that the commission is an executive non-departmental public body and therefore it is an arm’s-length body. Of course, the Government were given an opportunity to comment on the draft report, along with all key participants, but decisions about the contents of the metrics report ultimately rest with the EHRC. The commission’s proposals include a range of measures in relation to the gender pay gap from which employers will be encouraged to select in the way that best suits their circumstances, while enabling reasonable comparability for the future. Employers will be able to choose from three quantitative measurement options: an overall single figure; the starting salaries of male and female staff; or the differences between male and female pay grades by grade and job type. There will be no one-size-fits-all approach. The commission will also offer the option of a narrative, which will enable employers to explain the context. The narrative would not be a stand-alone element but would have to be combined with at least one of the quantitative measures. The commission would expect employers employing 500-plus employees to use two or more options from this menu—in most cases, the narrative plus one or more of the quantitative measures. The commission’s expectation in respect of employers employing 250 to 500 employees is that they would opt out of one of the quantitative indicators. I hear the concerns expressed by my noble friend Lady Turner of Camden, who has a fantastic record on these issues. We have taken those concerns into consideration, but it is not something that we can meet at the moment. However, as employers get to grips with the information requirements and begin to publish their data, the Government will carefully monitor the extent to which employers are publishing in accordance with the commission’s guidelines. If employers start to embrace greater transparency on pay, progress on recognising and challenging patterns of pay inequality should follow naturally, step by step. The Government do not intend to use the reserve power in Clause 78 before 2013, to give voluntary arrangements time to work. It would then be used only in the event that insufficient progress on voluntary reporting had been made by that time. The power enables a Minister to make publishing arrangements mandatory through regulations, which would identify which employers were required to publish what information relating to the pay of which employees, and in what form and manner the information should be published. Regulations would also detail the time of publication, which could not be more frequently than annually. Any regulations would have to be consulted on and then debated by Parliament. We expect that employers will meet their publishing obligations. They should know whom they employ, whether their employees are men or women and what they pay them. However, clearly there need to be proportionate sanctions that may be brought to bear in cases of non-compliance. Any criminal sanction would be pursued only in the most serious cases, and would entail a fine no higher than £5,000. The noble Baroness, Lady Morris, asked what we were doing in the public sector. The Government propose to use the power in Clause 152 to require all public sector employers with more than 150 employees to publish annually details of the gender pay gap in their organisation. This is one of the proposals for a set of specific duties to support better performance of the new equality duty in the Bill. The proposals are set out in the consultation document published on 16 June last year. The closing date for responses was 30 September. We are considering what people said and we will respond very shortly. When the noble Baroness criticised the Government for not paying former Ministers for Women, I would say we are bang to rights. I now turn to Amendments 88, 90 and 91, tabled by the noble Lord, Lord Lester. Amendment 88 would mean that voluntary arrangements were not given any time to work. It would reserve the power to make regulations in Clause 78 into a requirement to make regulations immediately the clause has technically commenced. The Government share people’s impatience at the slow progress being made in closing the gender pay gap, but we want to try to bring employers with us on this and convince the doubters that it is in their business interests. That means first giving larger employers the chance to demonstrate their commitment to change on a voluntary basis. The noble Lord asked why the clause does not give details of the information that may have to be published. We want the flexibility to allow us to learn from the voluntary arrangements, which will help to inform any future consultation on these details. Amendment 90 would implicitly require employers to have analysed the data they had collected to establish the causes of any pay gaps identified before publishing information only about those caused by sex discrimination. Such an analysis is a key element of a formal pay audit. The reserve power in Clause 78 could be exercised in a way that required employers to determine where men and women are doing equal work, or work of equal value, and to collect pay data to identify gender pay gaps. These are also elements of a formal pay audit. However, the power could not require employers to analyse the data to establish the causes of any gaps identified. Not every gap will be because of sex discrimination. We know, for example, that many men and women enter the labour market with different skills and qualifications. However, once the data had been published—which is what transparency is all about —employers could be more exposed to claims if the data disclosed a significant pay gap. It would therefore usually be in the employer’s own interests to analyse the data in order to ascertain the reasons for the gap. Amendment 91 would apply the clause to employers with 100 or more employees, instead of those with 250 or more. This would increase the number of employers in the scope of the clause by over 146 per cent, but it would only increase the number of employees by 16 per cent. We chose the 250-employee threshold as employers with fewer employees are classified as small and medium-sized enterprises. In addition, employers generally only invest in the kind of sophisticated IT, payroll and HR systems that would enable easy collation and presentation of gender pay gap information when their headcount reaches around 250 employees. Smaller employers will of course be free to publish information about their gender pay gaps, and we would strongly encourage them to do so if they wish. I add that a threshold of 100 employers would be lower than that which the Government propose to apply in the public sector. We propose to use the power in Clause 152 to require all public sector employees with 150 or more employees to publish annually details of the gender pay gaps. I turn finally to Amendments 89A and 91A, tabled by my noble friend Lord King—