Corporate governance

Gender pay gaps favouring men must be closed, report says

The House of Commons Business, Energy and Industrial Strategy Committee (the Committee) has published its gender pay gap report, Gender pay gap reporting. In the report, the Committee focuses on the adequacy and effectiveness of the gender pay gap reporting requirements introduced by the government with effect from April 2018, as well as the measures that businesses need to take in order to reduce and eliminate the gender pay gap. The report is the first publication of the Committee's inquiry, Corporate Governance: Delivering on fair pay, which was launched in March 2018.

The gender pay gap reporting requirements were introduced by the Equality Act 2010 (EqA 2010). Under EqA 2010, all public and private sector organisations with more than 250 employees must report their gender pay gap statistics on an annual basis. Public sector organisations were first required to report on 30 March 2018 and private sector organisations were first required to report on 4 April 2018. Organisations are required to publish their statistics and upload them on to a dedicated and searchable government website. Currently, only around half the UK workforce are expected to be covered by the present reporting requirements.

The Committee’s report identifies the UK as having one of the highest gender pay gaps in Europe. It notes that while the median gender pay gap across the economy is 18% in favour of men at organisational level, new figures reveal that gender pay gaps of more than 40% are not uncommon in some sectors, and that 78% of organisations report gender pay gaps in favour of men. Of the employers analysed, 1,377 (13% of the total) have gender pay gaps in favour of men of more than 30%. The report also highlights a range of initiatives that have been used, with differing levels of success, to enable women to make the fullest possible contribution in the workplace and to be rewarded accordingly.

As a first step to reduce the gender pay gap, the report suggests that more companies should be required to report on their gender pay gap, why there is such a pay gap and on what they are doing to close it. It calls on the government to widen the net of organisations required to publish gender pay gap data to those with over 50 employees (currently, it catches those with over 250). The Committee’s view is that by widening the reporting obligation, businesses will be required to take responsibility for the impact of their own policies, practices and culture, giving businesses an obligation, not just to reflect change, but to drive it.

Finally, the report calls for clarification of the way in which the remuneration of equity partners is included in the gender pay figures, before the 2019 figures are published. The report notes that the exclusion of the highest paid people in organisations made ‘a nonsense of efforts to understand the scale of, and reasons behind’ the gender pay gap and that the government was wrong to omit the remuneration of partners from the figures required by law.

For further information, see LNB News 02/08/2018 45.

Brexit

FMLC examines the effects of hard Brexit on legacy financial contracts

The Financial Markets Law Committee (FMLC) has published a report on UK withdrawal from the EU, issues of legal uncertainty arising in the context of the robustness of financial contracts. The report considers the possible consequences of a hard Brexit on legacy financial contracts, ie contracts in existence on exit day. The report takes an in-depth look at the question of continuity of legacy financial contracts and highlights the legal uncertainty which will arise in connection with them if there is no clarity as to the future of the UK-EU relationship post-Brexit. It also suggests a number of ways this uncertainty could be reduced or avoided.

For further information, see LNB News 07/08/2018 25.

Tax for corporate lawyers

Draft Finance Bill 2019—entrepreneurs’ relief and external investment

Tax analysis: New rules included in the draft Finance Bill 2019 (FB 2019) could close an existing shortcoming in the entrepreneurs’ relief rules by virtue of which someone owning 5% of the ordinary share capital of a company no longer qualifies for the relief if an external investor subscribes for new shares. The new rules will come into force in respect of fundraising events taking place on or after 6 April 2019.

Pete Miller CTA (Fellow), partner at the Miller Partnership explains how the draft legislation would effectively enable the shareholder to ‘bank’ the relief and to elect that the gain does not crystallise until they eventually sell their shares in a real transaction. He also considers whether these rules go far enough to be useful to taxpayers.

For further information, see News Analysis: Draft Finance Bill 2019—entrepreneurs’ relief and external investment.

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Dates for your diary

Trackers

To track key legislative and regulatory developments, see our Trackers:

1. Brexit legislation tracker
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4. Market Abuse—timeline
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Useful information

To view analysis of the latest deals in the market and the underlying transaction documents, use our Market Tracker deal analysis tool.

To read about the latest corporate announcements, see our Market Tracker weekly round-up: Market Tracker weekly round-up—3 August 2018.