Mind the Gap
Gender Pay Gap reporting is well underway, with large organisations publically announcing their results over recent months.
Whilst the basis for calculating gender pay gap is not a simple process, page 24 of the published guidance does make reference to salary sacrifice (or salary exchange) and how this affects the basis of the calculation. Effectively, the guidance states employers should use the salary after deduction for salary exchange when calculating its gender pay gap.
This is an interesting point in that salary sacrifice currently covers many types of benefits. However, once the new restrictions are fully implemented, only a limited number of ‘approved’ salary exchange arrangements will exist; notably for employee pension contributions.
We have looked at how salary exchange of pension contributions could influence the result of gender pay reporting. For Jelf’s own pension plan, we undertake a regular contribution review exercise where employees are invited to increase their personal contributions to the plan. There is approximately a 10% take up by staff to increase personal contributions. Naturally, this improves the savings ratio and outcomes for members as well as minimising the cost to employees because of National Insurance (NI) savings and for the Company too in its NI saved. A deeper look at who were increasing their contributions showed that more women than men increased their pension contributions. Men however, were making bigger increases than women when we compared the changes they had made.
When the number of salary exchange arrangements available for use become limited over the next few years, it could be the case the employers may find that their gender pay gap information changes positively or negatively.
It is accepted that the above point is an isolated look at salary sacrifice. Of course, many other factors like take up of child care vouchers and other benefits will influence how the gender pay gap percentage ends up.
What we would suggest is that the case for implementing and promoting salary sacrifice for employee pension contributions has been sound for many employers and remains the case when taken into account under gender pay reporting.
Jelf Group Defined Contribution Pension Scheme