The gender pay gap is something that continues to attract attention, with government moves to achieve greater transparency now gaining traction.
Draft regulations imposing obligations on businesses (that employ more than 250 employees) to publish their gender pay gap are expected in January 2016. At this stage we know that there will be a requirement to publish bonus figures, in addition to a single comparative figure, but beyond that the detail is unknown.
For HR managers worried about publication, there are a number of preparatory steps that can be taken now. Businesses that start this process now will be in a much stronger position to improve their pay gap figure, or provide a more convincing narrative rather than waiting until the final details are known. Steps can also be taken at this stage in relation to communication with stakeholders and demystifying the gender pay gap and what it may mean for your organisation.
What is the gender pay gap?
The gender pay gap shows the difference between the average earnings of men and women as a percentage of men’s earnings. The current national figure is 19.1%, although this figure varies across age ranges and when you consider full time and part time earnings.
Does a pay gap mean that an employer will be exposed to equal pay claims?
One of the most common myths around the existence of a gender pay gap is the concern that this will lead to a flood of equal pay claims. Gender pay is a totally different legal concept to equal pay, which is based on individuals comparing their pay where they do work that is the same (or broadly similar), or where work is rated as equivalent under a job evaluation study or found to be of equal value in terms of effort, skill or decision making. As the government explain in their consultation response, ‘An employer delivering equal pay may still have a large pay gap and an employer with no pay gap may be breaching the law.’
Generally there will be a number of reasons why an organisation has a gender pay gap, and a small element of this may be because of unequal pay practices. More often than not though, a key reason for the pay gap is due to low female participation through occupational segregation, particularly at senior levels of an organisation, or within different roles. Occupational segregation is defined in two different ways: horizontal segregation where women tend to cluster in clerical, caring, cleaning and catering type roles, and vertical segregation where women are less prevalent in senior roles.
What steps can an employer take now?
- First of all understand what your sectoral/industry average is to provide you with the wider context for your organisation’s figure. There is a wide variation. For example the gender pay gap in the Scottish Legal Profession is 42% and the financial and insurance sector has a gap of 35%.
- Are your systems set up in a way to calculate pay data according to gender? While this may be simple for large companies with sophisticated systems this may not be the case for all organisations.
- Calculate the single figure pay gap for the organisation. Unfortunately we do not yet know how this will be calculated, but the ONS use the median figure rather than the average and it is likely that a similar approach will be adopted.
- If your systems are capable of producing information at grade level then identify the pay gap per grade. To be meaningful this set of statistics should also identify the number of women to men at each level. This will give you information about whether the pay disparity is about low numbers of women or whether you may have an equal pay issue.
Interrogate the reasons for gaps in numbers or pay
Analysing this raw data can be very illuminating. It is often the first time that an organisation can see that there may be gaps in relation to pay or the numbers of women at a particular level. For the purpose of this update we have divided potential issues leading to a gap as being around pay and occupational segregation; there may be many more factors affecting an organisation’s gender pay gap.
Occupational segregation issues
- If you have lots of women at a middle grade but very few at the higher grade then this begs the question why?
- Are there barriers which are preventing female career progression? Do you have a future female talent pipeline?
- Is there some sort of unconscious bias in operation here? Or are there issues around flexibility in terms of balancing work and family life?
- This is where HR can really add value to the process by getting involved in targeted activity. Is there any feedback from that area of the business that could assist you in understanding root causes or do you want to conduct a survey to help?
Businesses should be aware that tackling occupational segregation is not something that can be fixed overnight: there is a much longer lead-in time to address these types of issues. If you have already taken steps and can produce data from previous years which demonstrates improvements that have already taken place then it would be worth summarising this to demonstrate your commitment in this area.
Issues around pay
First of all, are you confident that your pay grading systems are assessing people who are in comparable roles? This may be the time to review how your grading system works. Pay disparities can exist for many reasons particularly where mergers have taken place and people are working in similar roles at different rates of pay.Issues around pay
- Do you, for instance, need to conduct a job evaluation process to decide this and rule out any equal pay issues?
- Do you have concerns around the appraisal and reward system and what needs to happen going forward?
- What happens when new external recruits are hired – is there any pay scrutiny process around limits in a banding process? And how does this affect those who have been employed for many years with the organisation. This can be an area which can lead to significant discrepancies. Studies have shown that women are less likely to push for a pay rise.
- How are pay levels and pay rises assessed? In many private sector organisations there is very little pay transparency and managers may have a great deal of discretion. Do you need to introduce any further levels of accountability at the next pay review process to ensure that gender pay is being assessed? Do you need to broaden your metrics to take into account wider performance criteria? All of these issues can be looked at in advance of the Regulations being introduced to tackle pay disparities.
In contrast to occupational segregation issues, pay can be a quicker fix to make, albeit a more expensive one. There are also greater legal risks arising from resolving pay disparities. For this reason we would recommend that any informal review, or job evaluation is sent to your legal adviser to obtain the benefit of legally privileged recommendations.
Having identified reasons the next step is to identify a set of measures that you want to take to try and reduce the pay gap. This will assist you when the time comes to publish your pay gap figure where you can explain what steps you have taken so far to reduce the pay gap. Like all figures the context is everything.
You will want your objectives to be SMART – specific, measurable, accurate, realistic and timely.
Don’t try and implement too many measures – focus very much on what is achievable.
Examples of objective setting include:
- Promoting flexible working at senior levels of management including job shares and home working
- Introducing mentoring programmes to increase the pipeline of female talent
- Supporting women returning from maternity leave
Although employers will have to publish a pay gap figure showing the bonus pay gap, the government will need to publish details of how this will be calculated. We do not yet know whether this will be a percentage of total pay or a figure on its own.
On a positive note, employers who are worried about this issue can take comfort in the fact that they will have time to prepare. It is expected that employers will be given a generous period before they are required to publish – at least a further year after the final details are known, sometime in 2017. We would strongly recommend that employers do not wait and start preparing for publication now.