Purpose of the Bill

The purpose of the Workplace Gender Equality Amendment (Setting Gender Equality Targets) Bill 2024 is to amend the Workplace Gender Equality Act 2012 to:

• change the definition of ‘relevant employer’ to explicitly include subsidiaries (with 100 or more employees) as relevant employers
• provide the Minister with a new power to set targets and specify the rules in relation to the selection of the gender equality targets
• introduce a new requirement that relevant employers with 500 or more employees will be required to select and meet gender equality targets in a three year period and report on their progress to the Workplace Gender Equality Agency and
• provide that where an employer has not met the gender equality targets or demonstrated improvements within that period, they are considered to have failed to comply with their obligations under the Act.

The Bill was foreshadowed by the Minister for Women, Katy Gallagher, at an address to the National Press Club on 7 March 2024.

Background

Reporting obligations under the Workplace Gender Equality Act

The Workplace Gender Equality Act provides for the establishment of the Workplace Gender Equality Agency (the Agency) and sets out its role and functions. The Bills Digest to the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 sets out the history of the Act.

Under the Act, relevant employers (generally employers with more than 100 employees in Australia) must promote and improve gender equality in the workplace, including through the lodgement of annual reports containing information relating to the six gender quality indicators (GEIs) to the Agency.

The six GEIs are:

• GEI 1 – gender composition of the workforce
• GEI 2 – gender composition of governing bodies of relevant employers
• GEI 3 – equal remuneration between women and men
• GEI 4 – availability and utility of employment terms, conditions and practices relating to flexible working arrangements for employees and to working arrangements supporting employees with family or caring responsibilities
• GEI 5 – consultation with employees on issues concerning gender equality in the workplace
• GEI 6 – sexual harassment, harassment on the ground of sex or discrimination.

The information required to be contained in these reports is set out in the Workplace Gender Equality (Matters in relation to Gender Equality Indicators) Instrument 2023 made by the Minister for Women.

The Act requires the Minister to set, by legislative instrument, minimum standards in relation to specified GEIs, specified relevant employers and specified reporting periods. These are currently set out in the Workplace Gender Equality (Gender Equality Standards) Instrument 2023. The minimum standards apply to relevant employers with 500 or more employees and require them to have policies or strategies in place to support each of the GEIs.

If a relevant employer fails to comply with the Act, the Agency may name the employer in a report given to the Minister or by electronic or other means (for example, on the Agency’s website or in a newspaper) (section 19D of the Workplace Gender Equality Act 2012). As noted in the Explanatory Memorandum, while there are no direct financial penalties for non-compliance, an employer may not be eligible to compete for contracts under the Commonwealth procurement framework:

In accordance with the Workplace Gender Equality Procurement Principles, the consequence of non-compliance is that the employer will not be issued with a certificate of compliance. The existence of a certificate of compliance is considered as part of the employer’s eligibility to contract with the Australian Government through procurement processes. (p. 8)

Under the Workplace Gender Equality Procurement Principles, relevant employers seeking to supply goods or services to government at or above $80,000, must provide a Certificate of Compliance issued by the Agency as part of the procurement process.

Innes Willox, Chief Executive of the Australian Industry Group has argued that the Bill is damaging to effective government procurement practices in Australia and that the gender equality targets will be ‘onerous and inconsistent’. An article in the Australian Financial Review has noted that the Bill will impact a number of businesses that bid for government contracts, including technology companies such as Microsoft and SAP Australia; law firms; and global strategy firms such as McKinsey, Bain and Boston Consulting Group.  

Review of the Workplace Gender Equality Act

In October 2021, the Review of the Workplace Gender Equality Act 2012 (the Review) was established, with the final report released in March 2022. The Review made 10 recommendations, including recommending changes to the Act to require employers to take action on improving gender equality in their workplaces.

As noted by the Senate Finance and Public Administration Legislation Committee in its report into the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023, both the previous and current governments have committed to implementing these recommendations (pp. 5-6). The Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 responded to recommendations 2, 3, 5 and 9 of the report and passed both Houses on 30 March 2023.

Of relevance to the Bill, the Review recommended at Recommendation 3.1(a) that the government:

Bridge the ‘action gap’ to strengthen the existing minimum standards by amending the Workplace Gender Equality (Minimum Standards) Instrument 2014 to:

a. add a new minimum standard to require relevant employers with 500 or more employees to commit to, achieve and report to WGEA on measurable genuine targets to improve gender equality in their workplace against three of the six gender equality indicators… (p. 13)

The Review noted that ‘a major theme in the consultation was that employers should have to take action to improve gender equality in their workplaces in order to comply with WGEA’s reporting requirements’ (p. 37). However, a number of business peak bodies were concerned that it ‘was not the time to introduce any additional reporting requirements on business, particularly given serious challenges for business posed by COVID-19’ (p. 37).

In order to balance these concerns, the Review recommended that these obligations only apply to employers with 500 or more employees, which reflected that only these employers are currently subject to the minimum standards requirements. The Review also recommended that a regulatory impact assessment be conducted ahead of implementation (p. 38).

Regulatory impact assessment

On 9 February 2023, the Department of the Prime Minister and Cabinet published an Impact Analysis regarding the changes to the Workplace Gender Equality Act and associated instruments. An addendum to this Impact Analysis which focuses specifically on implementing Recommendation 3.1(a) is included as an attachment to the Explanatory Memorandum.

The Addendum considered three options:

• maintaining the status quo (option 1)
• requiring designated relevant employers to set three targets from a select list of targets related to gender equality and achieve (or at minimum improve on) these targets in a three year period (option 2)
• requiring designated relevant employers to set at least three targets from a menu of targets and achieve (or at minimum improve on) these targets in a three year period (option 3).

The government stated that while both options 2 and 3 would implement Review Recommendation 3.1.a, option 3 was the preferred option ‘as it aligns most closely with consultation feedback of providing guidance for targets while offering some choice for employers to select targets which are achievable for them’ (p. 30). While acknowledging that there may be an initial risk employers select ‘easier’ targets, the government argued that this will still require action to advance gender equality in the workplace and the Agency would work with employers to manage these risks (p. 30).

Key issues and provisions

Items 3 and 4 amend the definition of ‘relevant employer’ to explicitly include subsidiaries of parent companies (with 100 or more employees) as relevant employers in their own right. It also clarifies that in a corporate structure, a parent corporation is also taken to employ each of the employees of any of its subsidiaries.

According to the Explanatory Memorandum:

This does not prevent the Agency permitting related companies to submit a combined public report, provided that certain conditions are met, and it is possible to clearly distinguish who is the direct employer and who is the relevant employer by virtue of the deeming provision (p.15).

Item 8 inserts proposed subsection 13(3AA) which will require designated relevant employers to select gender equality targets and report against these targets as part of submitting their annual public report to the Agency. Proposed section 4A (at item 5) will define a ‘designated relevant employer’ to mean an employer who employs 500 or more employees. A subsidiary or parent company will not be considered a designated relevant employer if they would need to be combined with other entities in the corporate group to employ 500 or more employees.

Item 11 inserts new Division 2 (comprising proposed sections 17A to 17C) into Part IV of the Act to provide for the setting of gender equality targets. Proposed section 17A aligns the target cycle for reporting on the targets with the current reporting period set out in section 13A of the Act. The reporting period for the Commonwealth sector is the 12 month period between 1 January and 31 December, and for the private sector the 12 month period between 1 April to 31 March. The Explanatory Memorandum provides detailed guidance on how the cycle for the targets scheme is intended to operate in practice (p. 7).

Proposed section 17B requires the Minister, by legislative instrument, to set targets and specify the rules for the selection of targets. Before making such an instrument, the Minister must consult with the Agency. In foreshadowing the gender equality targets, Minister Gallagher stated:

These targets will focus on the gender makeup of their boards and the workforce; equal pay; flexible working arrangements; workplace consultation on gender equality; and efforts to prevent and address sexual harassment. [p. 19]

In setting the targets the Addendum to the Impact Analysis states:

Some additional costs will be placed on organisations in tracking and reporting on progress of targets in their annual reporting. The burden will depend on the targets selected and the way in which they can be measured. Administrative costs associated with setting new targets once existing committed targets are achieved present a relatively low burden. This is because all targets will be available in the legislation, where employers can consider their next set of targets well before committing to them. (p. 26)

Proposed section 17C provides that an employer will have failed to comply with their obligations under the Act where, if at the end of the target cycle, with respect to each gender equality target, the employer has not met the target or demonstrated improvement against the baseline for the target at the end of the target cycle. Improvement will be assessed against the baseline report – that is the prior year’s public report the employer provided to the Agency before selecting targets.

If an employer does not have a reasonable excuse for the failure to meet its obligations, then the Agency may name the employer in their report to the Minister under section 19D. Neither the Bill nor the Explanatory Memorandum provides guidance on what would constitute a reasonable excuse.