Despite no legal requirement for firms to publish information about gender pay gaps, if they fail to address it, could their brand and reputation could be damaged?
On 6 April, regulations came into force requiring employers with more than 250 staff to publish their gender pay gap. Employers now have until 5 April 2018 to publish the difference in average pay and bonuses between men and women, among other key metrics.
Numbers aside, as the Government plans to release league tables of gender pay gaps across different industries and candidates scrutinise employers’ equality credentials, how prepared are businesses for the potential brand impact?
Getting to grips with the calculations and the resulting numbers will give organisations a clear idea of where they stand. Broadly, these should cover
One area of potential confusion is the difference between the gender pay gap and equal pay. Employers will need to explain to their workforce that a gender pay gap report will present the difference in total average hourly pay and does not amount to an equal pay problem, which is about whether a man and a woman receive equal pay for equal work, rather than an analysis of pay across the whole workforce. This means that an organisation that pays men and women equally at each level, can still have a gender pay gap if women are under-represented at high levels. That said, if analysis reveals disparities in pay between men and women in the same roles, it’s crucial to take action.
It’s likely most businesses will show a gender pay gap. According to the Office for National Statistics, the median pay gap nationally is 18.1%. The Davies review, and more recently the Hampton Alexander review, pushes for an increase in the pipeline of women into executive positions in FTSE-listed companies. But, it highlighted that systemic unconscious bias within organisations, plus societal trends (such as more women in caring or parenting roles) still mean there tends to be an imbalance at senior levels.
Once the figures have been calculated, there is then the important task of building a coherent narrative and articulating proactive steps being taken to address any gap. There is no legal obligation to publish any commentary, but failing to contextualise the data and proactively manage it, could lead to incorrect assumptions being made and unnecessary reputational risk. Causes of gender pay gaps vary, not least the shape of an organisation’s workforce, but employees, prospective employees and even customers, will want to understand how these are being addressed.
Generating gender pay gap reports creates an impetus to look critically at an organisation’s recruitment, retention, pay and promotion practices, and to address any ‘leaks and imbalances’ in the executive talent pipeline. Are there, for example, inherent biases in systems; are flexible working practices open to employees across the organisation?
Bonus payments should not be overlooked either: are they awarded based on fair performance assessments regardless of gender? League tables may result in comparisons to employers in the same sector, and increased scrutiny from the press and trade unions, so actions need to be realistic and deliverable. Year-on-year comparisons will be made, so there needs to be a focus on continuous improvement.
With a year to compile their data, organisations may not yet feel the pressure to come up with an action plan on gender pay gap reporting. However, our experience is that boards are starting to ask questions and want to see the numbers, even on a preliminary basis. Consequently finance, reward and HR teams may come under increased pressure to report and comment earlier than they expected. As soon as competitors start reporting, there will be pressure from the board, not to mention curious existing and future employees and potentially shareholders, to see how their organisation fares in gender pay equality reporting. Organisations that begin to understand their gender pay gap now and develop a communications strategy could gain an advantage over their competitors.
As soon as competitors start reporting, there will be pressure from the board, not to mention curious existing and future employees and potentially shareholders, to see how their organisation fares in gender pay equality reporting.