Running a business is seldom straightforward, as you have to manage ongoing changes to legislation and finances.
One of the big changes coming that will impact both of these is the Employment Rights Act.
Some of the changes coming may take some time to implement, so taking a proactive approach may be essential for staying compliant.
The gender pay gap needs to be addressed and businesses should be working towards this goal.
What is the gender pay gap?
It can be slightly confusing to know what is meant by the gender pay gap, as two different definitions are used.
Most people will understand the gender pay gap as the difference in wages between equally skilled and qualified men and women doing the same job.
This is not the definition being used here.
Instead, according to the Office for National Statistics, the UK Government define the gender pay gap as “the difference between median hourly earnings (excluding overtime) of men and women, as a proportion of men’s median hourly earnings (excluding overtime).”
The latest data centres on April 2025, where it was determined that the “median hourly earnings (excluding overtime) were £20.27 for men and £18.87 for women. The resulting gender pay gap for employees was 6.9 per cent.”
While it is good that the gender pay gap has decreased over time, it is now necessary to try to eradicate it entirely.
Notably, the gender pay gap seems to be worse for older employees, suggesting that the pay disparity becomes more pronounced over time.
What should businesses be doing to tackle the gender pay gap?
It will be a requirement for all businesses to have a plan in place to tackle the gender pay gap from April 2027.
This plan can be created voluntarily from April 2026 as per the Employment Rights Act.
The gender pay gap is the result of a series of interconnected, complicated factors, so businesses should allow as much time as possible to work to resolve the issue.
Businesses should start by reviewing payroll records to determine the extent to which the gender pay gap is present within the company.
Alongside this, it is important to review ongoing practices around pay rises and promotions to ensure that these are handled robustly and are not contributing to a new gender pay gap forming.
One of the main reasons why the gender pay gap grows larger over time is that maternity leave can disrupt a person’s chance of getting better pay.
While it is illegal to discriminate against someone for being pregnant, a person may still miss out on opportunities while away on maternity leave and these could subconsciously influence promotion decisions later down the line.
This is further compounded by challenges caused by menopause, something the Employment Rights Act also aims to address, and needs to be managed sensitively.
We can help you review your financial position so that you can better budget for any required pay increases to address the gender pay gap.
This can be done alongside a payroll review, where you will determine whether there are any issues with how your team are being compensated.
In order to stay ahead of the upcoming enforcement in 2027, businesses should begin working towards closing the gender pay gap now.
Speak to our team today to find out how to get your payroll ready to close the gender pay gap.