Gender pay gap reporting and biological sex: what employers need to know

A change to the government’s statutory guidance on gender pay gap reporting has been published stating that reporting should be based on employees’ biological sex. This insight explains the change in more detail.

The government has updated its guidance for employers on preparing data for gender pay gap reporting, clarifying that reporting must now be based on employees’ biological sex, rather than gender identity.

In a further change to previous guidance, the guidance now states that non-binary employees should be included according to biological sex, rather than left out of the calculations as had previously been advised.

Why has the change to biological sex for gender pay gap reporting been made?

The Supreme Court’s decision in For Women Scotland Ltd v The Scottish Ministers last year confirmed that “sex” in the context of the Equality Act 2010 means biological sex not acquired gender. The gender pay gap reporting regulations sit under the Equality Act 2010 and the Act’s definitions (as interpreted by the Supreme Court) therefore apply to the gender pay gap reporting rules, notwithstanding that they refer to “gender” not “sex”.

What does this mean for employers?

While the law itself was clarified by the For Women Scotland ruling, the government guidance on gender pay gap reporting continued to suggest – until now - that employers rely on gender identity for pay gap reporting purposes. This has now changed, raising the question of whether employers hold the right data for reporting purposes.

If organisations do not hold data on biological sex, the guidance suggests they should take “reasonable and proportionate” steps to obtain it.

The guidance states as follows:

“We recommend that you have a policy or process to collect this data. This should be the same for all employees, regardless of their sex or gender identity.
9You should not single out individual employees and ask them about their sex or gender identity. To reduce the risk of this, consider using information employees have already provided, such as in HR or payroll records.
If this information is unavailable or unreliable, find a proportionate and confidential way to allow employees to confirm or update the record of their sex. For example, invite them to check their recorded sex and update it if needed. We recommend that you do not ask for documentation to confirm an employee’s biological sex.”

Employees with a Gender Recognition Certificate

The guidance is explicit that for trans employees, including those with a Gender Recognition Certificate (GRC), organisations should use their biological sex for gender pay gap reporting purposes, not the acquired gender which may be recorded on their GRC.

This is especially challenging for employers, since it can be a criminal offence to disclose an employee’s pre-GRC gender.

The guidance highlights the exceptions to this offence, saying that disclosure will be permissible on the basis that it is required by the law on gender pay gap reporting. It emphasises however that any such disclosure must be “tightly controlled, anonymised and only accessible to the smallest number of people.”

Practical challenges and what employers should be doing now

Consider what data you hold on an employee’s sex. HMRC currently require employers to report employees as either “M” or “F” so you will already be recording this data. HMRC will treat people as either their sex assigned at birth, or their sex as changed by a Gender Recognition Certificate. You are likely to be asking employees to self-report as HMRC do not require employers to attempt to verify their employee’s sex for tax purposes and, in practice, they will contact the individual, not the employer, in the case of any discrepancy[LS9.1]. In any case, it is difficult for employers to verify an employee’s sex, since there is no document that employers typically hold that would reliably do so for all employees (for example, an employee’s passport can be updated without a GRC).
Design proportionate processes. The guidance suggests that employers should simply invite all employees to “confirm or update the record of their sex”. This overlooks the potential mismatch between sex as changed by a GRC and biological sex described above, but the guidance at least confirms that employers can take the proportionate approach of simply inviting employees to update internal records of their sex. It also specifically states that employers should not “single out individual employees and ask them about their sex or gender identity”. The guidance therefore suggests that simply inviting all employees to confirm and update their records will be an appropriate approach to take.
Limit who can access sex data. Pre-GRC information in particular must be handled under strict confidentiality and only accessible to the minimum extent necessary, given the risk of a criminal offence. Consider carefully what systems hold this data and who has access to them.
Consider what you are collecting for other purposes. We recommend that you continue to ask about an employee’s gender identity/preferred pronouns, and to update this record at the employee’s request. This is the information you will use routinely at work.
Balance legal compliance with employee trust. This is one of those areas where legal requirements, data governance obligations, and employee trust all intersect. Employers will need to continue to approach this issue with sensitivity and should consider taking advice on how to strike this balance.

For more details on how to ensure your gender pay gap reporting is accurate, compliant and credible, read our complete practical guide to gender pay gap reporting and FAQs.