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The Gender Pay Gap and Employment Practices Liability Insurance

By 4th April 2018 businesses and charities with over 250 employees will be required, under a newly introduced clause of the Equality Act 2010, to have reported details of their gender pay gap to the government. Furthermore, these organisations must also publish their findings and provide a written statement on their own public facing website.

Some companies have reported and published the required data already and we will see many more as the deadline nears. In a number of cases, the information released has attracted the attention of press coverage due to the hitherto unconfirmed disparities in gender pay.

The BBC is the most high-profile of organisations where the fallout from pay data being published has been negative. In the summer of 2017, its publication of employees earning over £150,000 was overwhelmingly male biased and more recently one of its leading editors, Carrie Gracie, resigned from her post in protest at pay inequality.

Other companies who have published their gender pay information have also received negative press coverage and had to defend their position. One high street retailer’s recent report showed a 65% gender pay gap – attributed to the majority of lower paid shop floor workers being female and head office workers being male.  Whilst this imbalance is largely due to the demographic of customers the retailer serves, it presents a starting point from which they can look to narrow the gender pay gap in time for the reporting deadline in April 2019.

In light of the #MeToo campaign and numerous sexual discrimination/misconduct cases reported in the past year the ramifications of a severe gender pay gap could be huge for companies obliged to report this information. Not only could reputational damage lead to a fall in customer sales but the internal consequences may have an even greater effect.

The knock-on effect of gender pay gap information being publicly available, from an insurance point of view, is the potential for ‘undervalued’ staff to look for some form of recourse against their employer.

Whilst employment claims have been on the rise in recent years, there is the possibility that companies may receive a wave of claims from female staff who feel they have historically been overlooked for promotion or paid less than male colleagues performing the same role.

Whilst many businesses and charities will already have Employment Practice Liability (EPL) insurance as part of their Management Protection programme it is of vital importance that they ensure the cover is adequate, both in terms of level and basis of cover. Traditionally EPL insurance has been provided on an ‘Aggregate’ basis meaning that all claims arising during a policy year will erode the single level of cover afforded (£250,000 for example). A handful of successful EPL claims would ‘burn through’ this sum very quickly leaving the company to pick up the bill for claims not met by their insurer. A small number of insurers now offer EPL on an ‘Any One Claim’ (AOC) basis which would respond to all successful claims up to the Limit of Indemnity and subject to policy terms and conditions. This AOC policy basis would be a distinct advantage so worth checking without delay.

Whilst the reporting requirements of the Equalities Act 2010 apply to companies with over 250 staff, we may see a ‘trickle down’ effect into smaller organisations whose female employees demand transparency from their employer to address the same gender pay gap issues. The same approach to arranging suitable Employment Practices Liability insurance will therefore apply also.

For more insurance & risk management tips for your business, please contact Dominic Hutt on 07786 494847 or Dominic@DaffernsProfessional.com