April 4, 2019
All UK companies with 250 or more employees are required to publish their gender pay gap for 2018 by 5 April 2019, in line with the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. The initial year of reporting drew interest from media, the general public and investors as well as current and prospective employees. The month of April 2018 alone saw over 1,700 articles published on the topic across UK national and business publications.
One year on since mandatory reporting began, the initial expectations of seeing a marked improvement in the data is being dampened, as the preliminary data available shows that 4 in 10 companies are reporting a wider mean gender pay gap. Over 10,500 companies publicly reported their gender pay gap figures in 2018 and with just over 2,600 companies having submitted data this year so far, the reporting countdown brings with it an influx of submissions from the remaining 75% required to do so.
On the surface, the gender pay gap reflects the percentage difference in average hourly earnings for men and women in the same organisation – yet the drivers behind the discrepancies in the data are by no means straight-forward. The introduction of this legislative requirement was designed to encourage employers to take the time to understand and identify the barriers within their organisation and put in place meaningful measures to address them.
“Early submissions of this year’s data indicate that the second year of reporting is set to reveal some of the more deep-rooted issues”
Early submissions of this year’s data indicate that the second year of reporting is set to reveal some of the more deep-rooted issues reinforcing the gender pay gap. Although a significant number of companies have announced practical initiatives over the past 12 months, there needs to be an acknowledgement of long term commitment because the vast gap that many employers must tackle will take a significant amount of time to close.
We look at the important considerations that employees, investors and wider audiences may expect to see in this year’s data:
Closely correlated with the gender pay gap is the lack of female representation within an employee base, especially prevalent at a senior level. Since pay parity at senior level is crucial to moving the dial and closing the gender pay gap, the departure of just a single senior female employee could have a significant impact on how the data changes.
Addressing the lack of senior women in a company – let alone an industry – is not a straight-forward task, and the data may fail to reflect that this year, we
will see several instances where the gender pay gap has grown significantly for organisations due to an investment in hiring at graduate or junior level. This will increase the number of women in the lower pay quartile, therefore having little impact on improving the overall pay gap. In the long term, a hiring drive will have a positive impact on gender representation, therefore the rationale and expected returns from this initiative should be explained clearly by the company in its report.
Other scenarios that could see an organisation reporting widely different data year-on-year would be in situations where a restructure or merger has taken place, thus creating a whole new data-set that requires further interpretation and understanding of the changing demographics.
Whilst the gender pay gap reporting regulations require categorisation of employees as male or female, many companies recognise that some employees will identify as non-binary. Gender pay gap communications with employees can be used to invite staff to update gender identification records where they wish to do so, to ensure that accurate data is available.
The absence of this data may have an impact on the final gender pay gap submitted, as firms work with their employees to capture the data sensitively and appropriately.
Mandatory gender pay gap reporting is the first step towards ensuring that diversity and inclusion stays central to the Board and business agenda, however, companies must begin to recognise the many factors influencing the diversity within business, beyond gender. Age, socio-economic background, ethnicity, race and physical ability also play a role in potentially influencing the earnings of women.
Whilst the gender pay gap reporting does not require it, an increasing number of businesses are taking the opportunity to align gender pay gap reporting initiatives to wider diversity commitments, including; gender and LBTQ+; race; disability and ethnicity.
In 2018 the UK government launched a framework to support organisations record and voluntarily report information on disability, mental health and wellbeing in the workplace and the Institute for Public Policy Research has called for mandatory reporting based on disability, ethnicity and gender. As the conversation continues, companies would do themselves a favour to start looking at and preparing their own wider diversity data now.
Whilst targets are not required in the reporting, offering metrics and defining desired goals over a period of time will enhance the commitment outlined in the report narrative and ensure that the message comes across with authenticity. Companies don’t need to subscribe to a certain time frame and all goals should be realistic and tailored to the specific priorities in the situation. It has been widely acknowledged that the required change will likely only occur over a three to five-year period for most companies, and the strategy should reflect this.
Given the factors outlined above, which can often be hard to control, it can be difficult to predict
the gender pay gap movement over a period of time and it is therefore essential that all targets are supported with evidence of robust initiatives that have been taken to address gender pay gap. Examples of these actions include offering unconscious bias training and targeted promotion of women into senior roles through to structured returnships programs and implementing flexible working.
The gender pay gap reporting exercise should be seen as an opportunity to encourage open conversations on the topic within the business, and the commitments made in the report should reflect this dialogue. It is imperative that organisations take the time to understand their own individual situation and discuss the proposed solutions with its employee stakeholders first and foremost, rather than introducing generic exercises for the sake of it.
Understanding your data, stating your action plan and publishing the report will tick all the boxes required by April 4, but to ensure true success and meaningful change over the longer term, leadership is required to take this action into the day-to-day activities of the business.
For most organisations, closing the gender pay gap is going to require significant cultural change and the commitment must come from leaders at the top, in order for it to permeate throughout the rest of the business. Organisations with a global presence must consider going beyond the rhetoric and UK legislative requirements to take ownership of and publish its global data, or else risk losing the authenticity of the commitments it has subscribed to.
The near term progress in closing the gender pay gap will not be straight forward, so companies must prepare for a longer term commitment and use the regular reporting cycles to analyse and explain the changing data patterns year-on-year. Regardless of targets and timescales, commitment must be consistently messaged and demonstrated throughout the journey to maintain momentum and finally arrive at success. Whilst the solutions ultimately lie within organisational-level changes, the responsibility and overall accountability must be visible from the top. The benefits and return for businesses that invest in diversity are widely lauded and these will be felt most by those that embrace the need to understand the complexity, whilst maintaining an open, dynamic conversation with all stakeholders.