In this piece, Cybill Watkins, Group Product Legislation Manager at Zellis, shares the latest Gender Pay Gap reporting changes and explains why employers need to look beyond compliance to focus on the workforce data foundations that support transparency, trust and organisational adaptability.
For many employers, gender pay gap reporting has become a familiar annual exercise. Data is extracted from payroll systems, calculations are completed and the results are published.
However, recent updates to the Government’s Gender Pay Gap reporting guidance mean that organisations may now need to take a much closer look at the data sitting behind those calculations.
The change follows the Supreme Court ruling that, for the purposes of the Equality Act 2010, the definition of sex refers to biological sex. As gender pay gap reporting is derived from the Equality Act framework, the Government Equalities Office has updated its guidance to reflect that position. The revised guidance was published on 21 May 2026 and introduces significant changes to how employers should prepare their data and undertake their calculations.
Whilst the reporting requirements themselves have not changed, the way employers identify and categorise employees for reporting purposes may need to change considerably.
At a time when organisations are under pressure to adapt to changing workforce expectations, evolving regulations and ongoing economic pressures, this update highlights the growing importance of having workforce data that is trusted, reliable and fit for purpose.
What has changed?
The most significant alteration appears in the section previously titled “Recording employees’ gender”, which has been replaced with “Recording employees’ sex”. The updated guidance confirms that employers should use biological sex when carrying out gender pay gap reporting calculations. It also provides specific guidance on how organisations should treat employees who hold a Gender Recognition Certificate (GRC).
The Government has also updated parts of the calculation guidance, replacing references to “gender” with references to “sex” to align with the Supreme Court’s interpretation of the Equality Act.
In practice, this means that organisations reporting their gender pay gap should categorise employees according to biological sex, rather than gender identity or acquired gender. Employees who identify as non-binary should also be included in the data using their biological sex. Previously, some employers excluded non-binary employees from certain calculations.
The real challenge is data, not calculation
For payroll professionals, the calculation methodology remains largely unchanged. The challenge lies in ensuring the correct data is available.
Many organisations currently rely on information held within HR or payroll systems, but those systems may not necessarily contain the data now required for gender pay gap reporting. In some cases, the information held may reflect an employee’s current gender identity rather than their biological sex.
This creates an interesting compliance challenge for employers because payroll systems and Gender Pay Gap reporting may now require different sets of data for different purposes.
The Chartered Institute of Payroll Professionals (CIPP) has highlighted the potential disconnect this creates. Payroll data used for RTI submissions may not align with the data now required for Gender Pay Gap reporting, meaning employers could find themselves needing separate governance processes to support reporting obligations.
For organisations that currently extract Gender Pay Gap data directly from payroll systems, this is likely to be the area requiring the most attention.
This challenge reflects a wider reality facing many employers today. Organisations are being asked to do more with less, respond more quickly to change and make better workforce decisions in an increasingly complex environment. In what Zellis describes as the Great Worklife Squeeze, trusted workforce data becomes more than a compliance requirement. It becomes a foundation for effective decision-making, organisational resilience and workforce adaptability.
What should employers do now?
The updated guidance acknowledges that organisations may not currently hold the information required and states that employers should take “reasonable and proportionate” steps to obtain it.
From a practical perspective, employers should consider the following actions:
Review existing data sources
Start by understanding what information is already held across HR, payroll and employee records.
The guidance recommends that employers use information already available before seeking additional data. Existing records may provide sufficient information in many cases.
Assess data quality
Once data sources have been identified, organisations should assess whether that information is reliable for Gender Pay Gap reporting purposes.
Many employers may discover inconsistencies between HR systems, payroll records and historical employee information. These should be resolved well before the next reporting cycle.
For organisations looking to redesign how work gets done, confidence in workforce data is essential. Reliable reporting starts with reliable data, but so too does workforce planning, organisational decision-making and the ability to respond effectively to future change.
Introduce a consistent data collection process
The Government recommends having a clear policy or process for collecting sex data that applies equally to all employees, regardless of sex or gender identity. Employers should avoid singling out individual employees and should apply a consistent approach across the workforce.
Where information is unavailable or unreliable, employees should be provided with a confidential and proportionate method of reviewing and updating their record.
Review privacy and data governance controls
This is arguably one of the most important aspects of the updated guidance.
The Government has specifically addressed employees who hold a Gender Recognition Certificate. Whilst employers should use biological sex for Gender Pay Gap reporting purposes, information relating to an individual’s previous gender remains highly sensitive.
The guidance notes that access to this information should be tightly controlled and used only where necessary for reporting purposes before being anonymised. The CIPP has also highlighted the need for robust governance controls around collection, storage and access to such information.
Strong governance also plays a critical role in building employee trust. As organisations continue to modernise workforce processes and create more connected employee experiences, transparency, accountability and secure data management become increasingly important.
Check system capability
Many employers will need to consider whether their existing HR and payroll systems can support the new requirements.
Questions employers should be asking include:
- Can we separately identify the data required for Gender Pay Gap reporting?
- Are our payroll and HR records aligned?
- Do we have appropriate security and access controls?
- Can we evidence how the data was obtained and maintained?
- Do our reporting processes need to be redesigned?
These are no longer purely payroll questions; they are data governance questions.
They are also workforce readiness questions. The ability to manage, govern and act on workforce data is becoming an increasingly important capability for organisations navigating constant change.
Looking Beyond Compliance
It would be easy to view this update as a technical adjustment to a reporting requirement.
In reality, it reflects a broader shift in how organisations manage workforce information. As work becomes more complex and expectations continue to rise, employers need systems, processes and governance frameworks that help them adapt with confidence.
The revised guidance places data quality, governance and privacy firmly at the centre of Gender Pay Gap reporting. Employers who have historically focused on producing the report itself may now need to focus equally on how the underlying data is collected, maintained and protected.
At the same time, organisations should remember that the purpose of Gender Pay Gap reporting remains unchanged. The objective is still to identify workplace pay disparities, promote transparency and support meaningful action to address them. Indeed, employers should also be aware that Gender Pay Gap action plans are expected to become mandatory from spring 2027, subject to legislation.
Whilst the calculations themselves remain familiar, employers are operating in a very different environment. HR, Payroll and Reward teams are balancing compliance requirements, workforce expectations, cost pressures and organisational change simultaneously.
The calculations may look the same, but the data behind them has become much more important.
For HR, Payroll and Reward teams, now is the time to review processes, challenge assumptions about data quality and ensure systems are ready for the next reporting cycle. Because the biggest risk is no longer calculating the figures incorrectly. It is discovering that the data used to calculate them was never fit for purpose in the first place.
Ultimately, this guidance reinforces an important principle at the heart of worklife reinvention: organisations cannot successfully redesign how work gets done without first building trusted foundations beneath it. In Gender Pay Gap reporting, as in many other areas of workforce management, better decisions, better governance and better outcomes all begin with better data.
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