2019 is the second year in which all British organisations with more than 250 employees were required to report their gender pay gap information.
In summary, an organisation’s gender pay gap is the difference between the average hourly earnings of its men and women across all work roles. It is distinctive from an equal pay issue, which arises when men and women are paid differently for doing the same job.
To comply with their legal obligations, employers must annually publish six different metrics, including the percentage difference in the mean and median hourly pay and bonuses of women and men. The annual reporting deadlines are 30 March for public sector and 4 April for private sector employers, meaning that the second year of reporting has just been completed.
The Government’s rationale for imposing these reporting requirements is ‘what gets measured gets managed’. The hope is that transparency will drive change. But are there any indications yet to suggest this is working? Analysis conducted by the BBC has suggested that 45% of private companies have reported wider gender pay gaps than in 2018, with 78% of companies having a pay gap in favour of men. It seems that many organisations have not yet got to grips with the issue in any meaningful way.
In its August 2018 report on gender pay gap reporting and how the current regime could be improved and expanded, the Business, Energy and Industrial Strategy (BEIS) Select Committee presented evidence to suggest that many employers encountered practical difficulties when reporting due to the variety of ways in which they remunerate their staff. Other challenges included uncertainty around which workers fell outside the scope of the reporting duty and a lack of sufficiently experienced staff to complete their report.
The future of gender pay reporting
Going forward, the Government has committed to working with the Equalities and Human Rights Commission (EHRC), business groups and other stakeholders to clarify outstanding areas of ambiguity in order to create revised guidance for employers. It is not currently planning to make any changes to the existing reporting scheme, but instead recommends that organisations should publish narratives alongside their gender pay gap figures, as well as action plans to address their pay gap. In the first year of reporting, only 40% of organisations provided a narrative report, just 20% published an action plan and less than 10% shared their targets to reduce their gap. Of these, a high proportion of employers neither provided any useful detail nor did they set out any clear commitments to take action.
The EHRC published a report in December 2018 stating that employers who supplement their figures by publicly setting out the reasons for gaps and explaining what they intend to do about these through a target-driven action plan will be seen to be complying with the spirit as well as the letter of the law. This approach would also allow employers to provide meaningful progress reports each year.
Why does it matter?
Demonstrating that your organisation is addressing the gender pay gap is important for a number of reasons, not least to attract and retain talent. This information is publically available to all existing and prospective employees and will increasingly be referenced by the working population. In October 2018, the EHRC reported the results of a survey in its report, Closing the Gender Pay Gap, which found that a large majority of women were alert to the issue of gender pay when making career decisions. It impacts on women’s decisions regarding when to apply for a role and their motivation and commitment within that role.
There are a multitude of tools that employers can use within their organisations to raise awareness, in addition to ensuring that their annual gender pay report is accompanied by a clear narrative and a transparent action plan. The Government Equalities Office (GEO) has published evidence-based actions for employers, which makes valuable recommendations for the most effectual means of closing the gap. These include a thorough review of recruitment and promotion practices, appointment of diversity managers and/or task forces and the introduction of mentoring programmes, as well as targeted training opportunities.
The extent to which these initiatives are adopted by employers will help to determine whether, and how quickly, the gender pay gap starts to close.