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There is also the option of a voluntary narrative of causes of the pay gap. This, however, would only be done in addition to the quantitative measures, as an added extra rather than as one of the main metrics. We therefore believe that Clause 78 will not achieve a narrowing in the gender pay gap.

Secondly, it was suggested that there would be a menu of indicators which would allow companies to choose the ones most appropriate to them. Instead, here we see one narrative approach, and three quantitative measures. That is hardly indicative of a menu of choice, and it will not allow companies the flexibility to choose the metrics which will be most appropriate for them.

Does the Leader of the House concede that there is a danger that the legislation may do the exact opposite of what is intended and encourage companies to chase the best figures or manipulate them to their best advantage? This would be most disappointing. Nevertheless, there is a risk that these figures can be massaged to show the company in a better light. Not only would this not help to solve the gender pay gap, it would also serve to drive it deeper underground, where it is then harder to solve.

The CBI gave us some examples: in one company, you could have as many figures as you cared to have. It

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looked at salaries, and it came up with a mean annual salary of 11.3 per cent. However, if you looked at this figure with a bonus, then the mean was 12.2 per cent, and the median was 7.1 per cent. If the same salary was scaled up for full-time equivalent, then the pay gap was 6.4 per cent. The mean pay gap with a bonus would be 7.6 per cent. Most shockingly of all, playing around with these statistics would mean that they could appear brilliant, because the median would be 0.9 per cent. These are boggling figures, but by looking at the figures in different ways, that is exactly what one company was able to do. This would render the figures absolutely meaningless, and could serve to hide the problem.

We therefore believe that a different approach must be taken, and I look forward to the Minister's response. I beg to move.

Lord Wallace of Tankerness: My Lords, I speak to the amendments tabled by my noble friends Lord Lester of Herne Hill, Lady Northover, and myself. I share the outrage expressed from the Opposition Dispatch Box by the noble Baroness, Lady Morris, about the fact that after more than a generation since the Equal Pay Act 1970, there are still, as the Office for National Statistics has shown, huge disparities in pay between men and women.

I find it difficult that, having highlighted this, the noble Baroness wishes to replace what we on these Benches would argue is an already insufficient government response with an even less sufficient and even weaker response from the Official Opposition. The Conservative Party appears to be locking the stable door after the horse has bolted-you have to be found guilty of pay discrimination before an audit is visited upon you. We do not believe that this kind of "stick", or punishment-based approach, is the best way of dealing with this. We believe that the Government and the Conservative Party should ask-as we do-what, after all these years, this Parliament can do to end the discrimination in pay between men and women which still exists. We regret that the provisions which the Government have brought forward do not adequately answer that question. For a start, the scheme will be voluntary, whereas our amendments would make it mandatory. We are led to understand that the Government will exercise the powers which they are taking under Clause 78 only if there is an insufficient voluntary publication by employers by 2013-some three years away. That means another three years of allowing a situation to carry on which for the past 40 years has not answered the question. One wonders why they believe that in the next three years the gap will be closed, when the experience of the past 40 years would suggest otherwise.

6.15 pm

We also take exception to the proposed limit of 250 employees. We put it at 100 and the noble Baroness, Lady Morris, wondered why. We regularly hear concerns about the imposition of too many burdens on much smaller businesses. We also believe that if you require private sector employers with at least 100 employees to publish information about differences in pay between their male and female employees, this should identify discriminatory differences in pay and therefore encourage

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employers to eliminate sex discrimination in pay. They should know what their pay systems are. By the time you get up to a higher number of employees, that detailed level of discrimination in the system may not necessarily have been identified. They may think that they are good employers in terms of addressing issues of sex discrimination, whereas an audit might well prove that they are not. If it shows that particular pay systems are adversely impacting on their women employees, then through negotiation or otherwise, they would be expected to address the situation.

We are as a nation going through difficult times economically-there is no denying that. However, that should not be an excuse for companies in this country to exploit women as a source of cheap labour. I do not believe that anybody in this House believes that that should happen either. That is why it is important that we try to find a way to address the issue more immediately and effectively. We believe that our amendments will provide an answer. I do not suggest that it is the whole answer, but they make a more immediate attempt to address the question of why, after all these years, we have not eliminated the pay gap.

I encourage the Government to go down the road which we are adopting, because it is more likely to produce answers sooner rather than later. After all, we have waited far too long already.

Baroness Royall of Blaisdon: My Lords, Amendments 24, 25 and 26, in the names of the noble Lords, Lord Lester and Lord Wallace, and the noble Baroness, Lady Northover, are the same as those which the noble Lord, Lord Lester, moved in Committee. At the outset I should say that, like both noble Lords opposite, we all agree that the current pay gap is unacceptable. We all share the same aim. We all want to reach the same destination, but we differ on the pathways to be followed.

Amendment 24 would mean that the voluntary arrangements for publishing gender pay gap information being sponsored by the Equality and Human Rights Commission were not given any time to work. A Minister would have to make regulations under Clause 78 as soon as the clause was brought into force. The Government appreciate the contribution of the commission and its partners in working out options for measuring the gender pay gap, and of course we regret that the partners were ultimately unable to agree to the menu of options that the commission decided on. We would clearly have preferred employers' organisations still to be engaged with the process. We hope that they and individual employers will recognise that real benefits are to be had in participating and helping to shape the future agenda on pay transparency rather than standing on the sidelines and perhaps having one imposed on them at some point.

The commission is currently developing guidance for employers, which I understand will be published within the next few weeks and disseminated as widely as possible to the target group-some 7,000 private and voluntary sector employers which employ at least 250 staff each. They are on track, and we stand by our policy of giving larger employers the chance to demonstrate their commitment to change on a voluntary basis, thereby making resort to the reserve power in Clause 78 unnecessary.

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As I explained in Committee, that power could be exercised so as to require employers to find out where men and women are doing equal work or work of equal value and to collate pay data to identify gender pay gaps. The power could not, however, be used to require employers to analyse the data so as to establish the causes of any gaps identified, not all of which will be due to sex discrimination.

By contrast, Amendment 25 would effectively require employers to have analysed the data they had collated to establish the reasons for any pay gaps identified, prior to publishing information only about discriminatory differences in pay. That is, I suggest, hardly an incentive to make gender pay gaps more transparent.

With the greater transparency that publication of the data under our proposals will bring, employers could be more exposed to claims if the data showed a marked gender pay gap. Accordingly, it would be in an employer's own interests to analyse the published information to establish the reasons for the gap. However, we do not think it appropriate that they should be obliged to do so in all cases or to publish only discriminatory differences in pay.

Amendment 26 would apply the clause to employers with 100 or more employees instead of only to those with 250 or more. The noble Baroness, Lady Morris, asked why the number should be 250 and not 100. We opted for a 250-employee threshold because employers with fewer staff are classed as small and medium-sized enterprises and it is not as simple or as inexpensive for them as it is for larger employers to collate information about their gender pay gaps. I should also say that these employers employ around 40 per cent of those who work in the non-public sector. However, smaller private and voluntary sector employers are free to publish information about their gender pay gaps if they want to, regardless of Clause 78, and we encourage them to do so. I should add that a 100-employee threshold would be lower than that which we propose to apply in the public sector, which would clearly not be desirable. We will require public authorities with 150 or more employees to publish annually details of their gender pay gaps.

Amendments 23 and 27, tabled in the names of the noble Baronesses, Lady Warsi and Lady Morris, are the same as amendments moved in Committee. These amendments would remove Clause 78 and introduce a new clause. We had a full clause stand part debate on that occasion, so I hope that the noble Baronesses will forgive me if I do not repeat what I said then to explain why Clause 78 is in the Bill. It is on the record.

Amendment 23 would require employers that were found to have breached the equal pay provisions of the Bill to conduct a pay audit and publish the results. I set out in Committee the reasons why the Government believe that this measure would make very little difference in practice to closing the gender pay gap, and our reasons have not changed. The reasons are that very few equal pay claims succeed at tribunal; the proposed new clause would not affect in any meaningful way organisations in the private sector, where the vast majority of people are employed; and more than 98 per cent of equal pay claims that reach an employment tribunal involve public sector bodies, most of which

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have already conducted pay audits-indeed, the results of these audits are often the reason why a case has been brought in the first place. The proposed new clause also removes any discretion from employment tribunals and would lead to their ordering pay audits where they may be inappropriate-for example, where the employer has recently conducted a pay audit. Of course we agree on the need to close the gender pay gap, but the noble Baronesses' proposals would make very little difference in practice. We believe that they could be regarded as punitive and arbitrary.

The noble Baroness asked a series of questions. She said that the CBI said that the metrics are capable of being manipulated or varied. That is why the EHRC is producing guidance on how employers should use the assessments in the menu of options. The commission will monitor how employers are deploying the options, which will help us to decide whether these are the right measures to prescribe if it becomes necessary to use the power in Clause 78.

The noble Baroness also suggested that the clause imposes disproportionate, bureaucratic, costly and time-consuming burdens on businesses at a time of recession. Fairness and equality are not things that we drop at the first sign of a downturn and we believe that, at such times, these matters are even more important. I am sure the noble Baroness agrees with me on that point.

As for the metrics proposed by the commission, there are, as the noble Baroness suggested, three options for measuring pay differences plus a narrative approach which would have to be combined with at least one of the three measurement options. The first of the three options for measuring the gender pay gap is to calculate the difference between the median hourly earnings of men and women by reference to all female employees' median pay and all male employees' median pay. That is sometimes called the single figure measurement. The second option is to measure the difference between the average basic pay and total average earnings of men and of women by grade and job type. The third is to measure the difference between the starting salaries of men and of women. The narrative approach would explain the context, explore and analyse the causes of any gender pay gaps, describe workforce involvement in addressing the issues, and seek lists of the actions being taken.

It is not for the Government to endorse or criticise a particular metric put forward by the EHRC. The commission has worked hard with its partners to identify options that might work for a particular employer. Our main concern is that the menu of options proves to be fit for purpose so that an increasing number of target employers will take them up over the coming months. However, we will only know if this is the case in the years to come as we and the commission monitor progress.

I recognise the point that we have reached in the discussions which have taken place. However, we hope that employers will see that embracing the EHRC's menu of options is in their own interests, acting as a means of attracting and keeping a high-calibre and diverse workforce and as a signal to potential clients

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that they are forward-looking and progressive concerns with which to do business. I also note that the EHRC has said that there is scope for further consultation, which I welcome. It has said that,

We hope that that dialogue will continue swiftly. In the mean time, I ask the noble Baroness to withdraw her amendment.

Baroness Morris of Bolton: As ever, I am most grateful to the noble Baroness the Leader of the House for her considered response. Perhaps I may say to the noble Lord, Lord Wallace, that we do not see our position as a weaker alternative; we see it as having two great strengths that the Government's proposals lack. The first is that it would cover women working in companies of all sizes, so it would protect all women. Secondly, it does not place an unnecessary burden on good and fair employers. It sends out a strong signal to all employers. The noble Baroness talked about pathways. We would not walk the Government's pathway, and it is clear that they would not walk ours. Nevertheless, however strongly we may feel about this issue, we will not press it to a vote. I therefore beg leave to withdraw the amendment.

Lord Wallace of Tankerness: My Lords, having heard the response of the noble Baroness the Leader of the House and the indication from the Conservative Front Bench that they would be minded to oppose, I do not want, in the interests of making progress, to cause a Division on this matter in order to take the opinion of the House. However, it should be recorded that we remain unpersuaded by the arguments from both Dispatch Boxes. We on the Liberal Democrat Benches feel very strongly about this issue.

Amendment 23 withdrawn.

Clause 78 : Gender pay gap information

Amendments 24 to 27 not moved.

6.30 pm

Amendment 28

Moved by Lord Rosser

28: After Schedule 7, insert the following new Schedule-

"SCHEDULEWork: seafarersApplication of Part 5

1 (1) Part 5 of this Act applies to a seafarer who works wholly or partly within Great Britain (including United Kingdom waters adjacent to Great Britain) if-

(a) the seafarer is on a United Kingdom ship and the ship's entry in the register maintained under section 8 of the Merchant Shipping Act 1995 specifies a port in Great Britain as the ship's port of choice, or

(b) the seafarer is on a hovercraft registered in the United Kingdom and is operated by a person whose principal place of business, or ordinary residence, is in Great Britain.

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(2) Part 5 of this Act also applies to a seafarer who works wholly or partly within Great Britain (including United Kingdom waters adjacent to Great Britain) and who is-

(a) on a ship registered in or entitled to fly the flag of an EEA State other than the United Kingdom, or

(c) on a hovercraft registered in an EEA State other than the United Kingdom,

if sub-paragraph (3) applies.

(3) This sub-paragraph applies if-

(a) the ship or hovercraft is in United Kingdom waters adjacent to Great Britain,

(b) the seafarer has attained the age of 18,

(c) the seafarer is a British citizen or a national of an EEA State other than the United Kingdom, or of a designated state, and

(d) the legal relationship of the seafarer's employment can be located within Great Britain or retains a sufficiently close link with Great Britain.

2 (1) Part 5 of this Act applies to a seafarer who works wholly outside Great Britain and United Kingdom waters adjacent to Great Britain if-

(a) the seafarer is on a United Kingdom ship and the ship's entry in the register maintained under section 8 of the Merchant Shipping Act 1995 specifies a port in Great Britain as the ship's port of choice, or

(b) the seafarer is on a hovercraft registered in the United Kingdom and is operated by a person whose principal place of business, or ordinary residence, is in Great Britain,

and sub-paragraph (2) applies.

(2) This sub-paragraph applies if-

(a) the seafarer is a British citizen, or a national of an EEA State other than the United Kingdom, or of a designated state, and

(b) the legal relationship of the seafarer's employment can be located within Great Britain or retains a sufficiently close link with Great Britain.


3 In this Schedule-

"British citizen" has the same meaning as in the British Nationality Act 2010;

"designated state" means the countries of the African, Caribbean and Pacific Group of States, the Kingdom of Morocco, the Most Serene Republic of San Marino, the Peoples' Democratic Republic of Algeria, the Republic of Croatia, the Republic of Macedonia, the Republic of Tunisia, the Republic of Turkey, the Russian Federation and the Swiss Confederation;

"United Kingdom ship" means a ship registered in the United Kingdom under Part II of the Merchant Shipping Act 1995;

"United Kingdom waters" means the sea or other waters within the seaward limits of the territorial sea of the United Kingdom."

Lord Rosser: My Lords, discrimination against foreign national seafarers is permitted under the Race Relations Act 1976-I think in Sections 8 and 9. Seafarers have to reside and be recruited abroad for the current exemption to apply. They are recruited abroad on local rates of pay to work on UK-registered vessels. Seafarers on ships trading between UK ports, including UK-registered vessels, can be paid at rates significantly below the national minimum wage.

This discrimination is applied in British workplaces. Other industries employing workers from abroad would, rightly, be expected to pay UK rates of pay when in a UK workplace. The number of UK seafaring ratings has declined from over 30,000 in 1980 to fewer than

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9,000 today. In the last decade, the number of British ratings has fallen by almost 20 per cent. One of the primary reasons for this is the use by shipping companies of so many foreign national seafarers on low rates of pay, facilitated by the continued exemption in the 1976 Act.

In addition, foreign national seafarers work longer hours of duty than UK seafarers. For example, the UK seafarers employed by P&O Ferries work for one month followed by a month off. This is due to the long and demanding working hours. On ferries, these are normally around 84 hours per week but can be longer. Portuguese seafarers undertaking the same hours work for two months on and one month off. Filipino seafarers can be engaged for three whole months before they receive one month off.

Discrimination specifically against other EU nationals has of course now been declared illegal by the European Commission. A consultation paper setting out options for reform was finally published in March 2007 but proposals were put off on the basis that changes would instead be introduced alongside other changes in discrimination legislation under the single Equality Bill. Regulations to reform existing seafarer discrimination were published early in December 2009. They do not repeal all the discriminatory provisions of the 1976 Act but represent significant progress.

It is proposed that the current discrimination against EU and EEA nationals be outlawed on UK-flagged ships when a ship is in UK territorial waters. This is also proposed for non-EU and non-EEA nationals. In addition, for EU-flagged ships, discrimination could be outlawed for just EU or EEA nationals if the seafarer's employment had a sufficiently close link to the UK. How this will work needs to be clarified by the Department for Transport. The priority is now to ensure that regulations can become law alongside the Equality Bill. The best way to ensure that this happens and that the regulations stay as currently drafted is through the regulations being incorporated in the Bill. That is the purpose of Amendment 28, which I hope my noble friend the Minister will agree to.

A second issue is the national minimum wage. We are still waiting for action to be taken on enforcement of the national minimum wage for seafarers on ships trading in UK territorial waters or, as a minimum, on all ships trading between UK ports and the UK offshore sector. The Government have attempted in the past to defeat these proposals by referring to the position of the Foreign Office, which says that enforcement cannot be taken on foreign-flagged ships in any circumstances. However, as a result of the matter being raised by the tabling of amendments in the other place, I understand that the Department for Transport has agreed to convene a cross-departmental meeting to consider apparently conflicting legal advice.

The issue is that foreign national seafarers are entitled to the national minimum wage on UK-registered ships only when they are in port or in internal UK waters, as opposed to UK territorial waters. UK-resident seafarers receive the national minimum wage in UK territorial waters provided that the ship is flagged in the UK. UK internal waters include, for example, the Solent, the sea between Scotland and the Inner and Outer Hebrides, the Firth of Forth, the Wash and the Thames estuary.

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They do not include, for example, UK territorial waters between Scotland and Shetland or between the mainland and the Channel Islands or the Isle of Man.

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