Tom Heys April 27 2022 Gender pay gap reporting 2021: analysis of latest results Lewis Silkin LLP | Employment & Immigration - United Kingdom Tom Heys Employment & Immigration 600 missing employers?Gender pay gaps in 2021Variation in gender pay gapsGender pay gaps by company sizeBonus gapsQuartilesEmployers had until 4 April 2022 to publish their gender pay gap statistics relating to 5 April 2021. This article analyses the results.600 missing employers?While a total of 9,872 employers published their gender pay gaps within the deadline, a few are continuing to come in, which will forever be tarnished with a "late" badge on the government website.In 2020, 10,548 employers reported their gaps. This means that, unless many employers have gone out of business or fallen below the 250 employee threshold for gender pay gap reporting obligations, there are probably up to 600 to 700 employers still yet to publish. The Equality and Human Rights Commission (EHRC) has said that it will take enforcement action against those employers that have failed to report their gaps on time for two consecutive years.EHRC enforcement action has, to date, been limited to the sending of letters and some naming and shaming. It has formally investigated one employer (who posted obviously false gender pay gap figures – a perfect score of 0% gaps for everything and an equal gender spread in every quartile), but it is not known to have ever imposed a fine.The EHRC's legislative authority to impose fines is limited (for further details please see "EHRC gets tough on enforcing gender pay gap reporting"). It is empowered to take action against Equality Act infringements only. Therefore, while the gender pay gap reporting regulations were made pursuant to the Equality Act, they are a separate piece of legislation that creates no new powers for the EHRC.Gender pay gaps in 2021Overall employers have seen reductions in their mean and median pay gaps. Both are down compared to 2020 values, which continues previous trends.Overall, 87.7% of employers have positive mean pay gaps in favour of men, while 78.1% have negative median pay gaps. This represents a slight increase compared to 2020 (86.5% and 78.0%, respectively)Variation in gender pay gapsAn interesting trend that is appearing in the data is that there is increasing variability. Although gaps may be falling overall, the fall is not consistent and employers are seeing increasingly large changes from year to year.Standard deviation is a measure of this (the higher the amount, the more variable the data). The graph below shows the standard deviation for change in mean and median pay gaps.There are two possible reasons for the increasing variability in gender pay gaps:the impact of covid-19 over the last few years – covid-19 may be responsible for a large part of the overall variability because of the impact it has had on gender pay gap reporting. Reporting of 2019 figures became voluntary as the deadline came at a time when the country was gripped by the early stages of the pandemic in early 2020. That year's figures were probably affected by publication bias – only those with good stories to tell will have published. After that, 2020's figures will have been influenced by the large numbers of people furloughed, completely changing many datasets and causing gaps to change wildly. With furlough less of a factor in 2021 (for some employers, but not all), many gender pay gaps will have been back to normal. It is expected, therefore, that variability will reduce in future years; andthe growing numbers of small employers that are voluntarily reporting their gender pay gaps – in 2017, only 285 small employers reported their gaps; in 2021, 517 did so. As is shown below, the smallest employers have the greatest variability in gaps and so, given that they are accounting for a greater proportion of the overall figures, they may be influencing this upwards trend.Gender pay gaps by company sizeLooking at the data by company size, two interesting trends appear: the biggest employers have seen the biggest reductions in their gaps, and the smallest employers have seen the greatest variability in their gaps.Biggest employers have seen the greatest reduction in gender pay gapsBecause of the massive headcounts, gender pay gaps in the largest employers can be the toughest to shift. Why then have they seen the biggest reductions in gaps? There are a few possible reasons:furlough – this has affected gender pay gaps in different ways. In a workforce with a large amount of low paid women who had to be furloughed, this meant that gender pay gaps would be calculated only from higher paid women. Mean and median pay would be higher and so overall gaps lower. Although this might not be the case for all employers, it could be part of the reason behind the changes;human error – a few employers' headcounts have apparently risen from just a few hundred to over 20,000 within a year. Although this is possible, it is unlikely and it is suspected that the wrong boxes have been ticked by some employers. As there are relatively few very big employers overall, a few wrong classifications may be skewing the figures; andaction to address gaps – many large employers have made concerted efforts to reduce their gender pay gaps. They have the biggest resources and it's possible that their investment is beginning to pay off. Small businesses have more variable gender pay gapsSmaller employers should expect to see greater change in their gender pay gaps. This is borne out pretty well in the data. The charts below show this (as mentioned above, higher standard deviation means greater variability). This means that smaller companies may have a harder job to do when drafting their gender pay gap reports. Gaps will change more each year just by natural fluctuation; a few people can have a bigger impact on gaps. In bigger companies, this randomness is flattened out because of the extra size. Smaller employers need to make sure they understand how much of their changes are due to the impacts of their gender diversity initiatives, and how much is just down to chance.In Ireland, the new gender pay gap reporting regime will initially apply to those with 250 or more employees, but this threshold will fall in future years (for further detail please see "Gender pay gap reporting in Ireland: first details announced"). Those with only 50 employees will be caught and have to report. Employers with Irish operations will need to bear this in mind, especially since the new legislation has an important difference to the UK regime: employers must explain the causes of their gaps.Bonus gapsThese bonus gaps are the first covid-19-affected gaps to be reported since they cover the period from 6 April 2020 to 5 April 2021.Generally, bonus gaps tend to increase when company performance increases. This is because men will tend to occupy the roles with greatest bonus-earning potential. In a time of national economic strife, it is expected that bonuses for the highest earners would reduce the most and, therefore, mean bonus gaps fall. However, the data suggests the opposite: mean bonus gaps are slightly up on average. At the same time, there has been a decrease in median bonus gaps.How can these two chances be reconciled? It is worth recalling here an important difference in the calculation of the bonus gaps – they are calculated only from those that received a bonus. By adding or removing lots of low value bonuses, the pool used in the calculation can change and this affects the overall gaps.During the pandemic, employers took many different types of action in the struggle to survive. Some had to remove low value bonuses to save money, whereas others were able to take the opposite approach and made special "covid bonuses" to reward employees during difficult times. These different approaches have changed bonus gaps.QuartilesIn previous years, employers generally increased the proportion of women in the upper quartile (the highest paid). Getting more women into the most senior and best paid roles is a key part of any employer's objective of reducing a gender pay gap. However, increasing the proportion of men in the lower quartile (lowest paid) would also reduce gender pay gaps. Because these roles tend to have highest turnover and lowest barriers to entry, it can often be the quickest "win" when it comes to reducing gaps. The graph below shows that perhaps this idea is starting to be embraced more by employers. For the first year, there has been (on average) a small increase in the proportion of men in the lower quartile. However, it is also possible that it is just a reversal of the drop in the previous year. On average, 2021 was the first year that most employers did not increase the proportion of women in the upper (highest paid) quartile. At the same time, there has been no real change in the proportion of employers that have seen an increase in men in the lower quartile – it's still not an area where most employers are seeing changes. Given the above, this suggests that in those employers that have seen changes, they have been of a larger degree.For further information on this topic please contact Tom Heys at Lewis Silkin by telephone (+44 20 7074 8000) or email ([email protected]). The Lewis Silkin website can be accessed at www.lewissilkin.com.