In the first of a series of articles on gender pay gap reporting, we look at the position so far and what implications the new reporting obligations could have for public and private sector employers alike.
What is the gender pay gap?
It is important for employers to realise that the gender pay gap is a different concept to that of equal pay. The gender pay gap is a term used to describe the difference between the average pay of men and women in an organisation. As such, it reflects not just whether men and women are receiving equal pay for equal work, but also whether women are employed within the senior, higher paid, management jobs and whether the organisation, or at least the industry it is within, is able to attract and retain an equal number of female employees.
So, in any given organisation, men and women can be paid the same at every grade, but if women are predominantly in junior roles while men dominate higher-paid management roles, the organisation will have a gender pay gap.
Think, Act, Report
To date, organisations have avoided compulsory reporting of their gender pay gap. In 2011, the government launched a voluntary reporting initiative, 'Think, Act, Report', but participation in the scheme was low. According to the Office of National Statistics, the overall gender pay gap in the UK is 19.1% and the government is keen to close this "in a generation".
The government has therefore consulted about introducing compulsory reporting for organisations with more than 250 employees. The term 'employees' is likely to be broadly defined and to include anyone working within the organisation who is not genuinely self-employed. Both public and private sector employers will be covered and organisations will need to include salary and bonus payments when calculating their gender pay gap.
Regulations are currently awaited which will clarify what information needs to be reported on, where this needs to be published and with what frequency. However, there are a number of implications which employers need to start thinking about if they want to be able to develop a clear strategy once the detail is known.
- Collating the information is likely to be a time-consuming task and some internal systems may not have the capacity to do so. This is likely to mean an investment of time and money for employers
- Publishing one overall pay gap figure is likely to be misleading and organisations will want to be able to break this figure down by part-time working, grading or geographical area. Whether this will be possible remains to be seen. Even if further information can be provided, it is likely to be the overall figure which captures the public / media attention
- A large gender pay gap could damage an organisation's brand, placing it at a disadvantage against its competitors and impacting on its ability to attract employees or customers. This could be reinforced if the pay gap continues, or gets wider, and therefore does not improve over time
- Significant pay gaps could also lead to employees questioning their pay levels internally, leading to grievances and potential legal claims (for Equal Pay) where differences in pay cannot be explained for reasons unrelated to the employee's sex
The implications of compulsory gender pay gap reporting are significant and employers should review their position before the obligations come into effect in order to understand what their current pay gap is, what the causes for this are, and what steps can be put in place to address it. Taking action now also allows organisations to see whether historical data can show a reduction in their pay gap over recent years to demonstrate that steps already being taken are having an effect.
Watch out for our next articles which will look at how to present gender pay gap information and how to develop a strategy to close your gender pay gap.