The 2018 gender pay gap: grounds for optimism?

There may not have been a dramatic change in the gender pay gap, but HR, analytics and reward specialists are far from gloomy about what the latest crop of reports reveals.

The gender pay gap has not narrowed since 2017, but behind the headlines are encouraging signs, writes the CIPD’s Peter Cheese below. Companies are slowly coming to terms with collecting data using more modern tools and reporting their figures correctly, but there is still a long way to go.

Then there remain some who feel the entire exercise is futile. As she did last year, Katie Andrews, journalist and associate director of the right-leaning think tank Institute of Economic Affairs (IEA), argues that the data tell us nothing.

In the IEA report published yesterday (4 April), she writes: “Now into the second year of mandated gender pay gap reporting for large organisations, it has become increasingly clear that the influx of data – ranging from negative gaps, to gaps exceeding 50% – fails to provide any meaningful insight into equal or fair pay for men and women in the workplace.”

She adds: “The incentives created by the pay gap reporting measures are not simply to hire more women into senior roles, but to hire fewer women into junior or lower paid roles – regardless of their qualifications – to achieve the closest calculation a company can get to a 0% pay gap.”

Her views echo those of professor of psychology Jordan Peterson who believes that men and women naturally assume different roles in the workplace.

Our panel of commenters, however, prefer a more practical, grounded approach, seeing gender pay gap reporting as a useful window on the evolving structures of British businesses and organisations, the decision-making that takes place within them and the aspirations of those, particularly women, who work for them.

‘There could be good news behind increases in the pay gap’

Peter Cheese, chief executive of the CIPD:

It’s disappointing that many employers are still not providing a narrative or action plan. Organisations that simply provide their numbers are failing to meet the increasing appetite and expectation for transparency among all stakeholders, including employees, investors, and regulators. Financial figures would never be given without any explanation for them, and gender pay gap reporting should be no different.

A significant proportion of companies have reported an increase to their gender pay gap. Some of this may be from businesses initially focused on bringing more women into entry-levels roles in order to build a pipeline of female talent. This is a genuine commitment to lasting change and we must welcome these efforts even if it does mean the numbers do initially go up instead of down.

‘They get paid less but women are happier at work than men’

Deborah Frost, chief executive of employee services group Personal Group:

I’m encouraged that gender pay reporting continues to drive the conversation around pay discrepancies, and we’re seeing progress at several large organisations including Greggs, H&M and Mitchells & Butlers. However, many organisations have seen their gap stall or even increase, and although this may be due to positive initiatives such as increasing the intake of women at entry-level, these short-term fluctuations in results are only forgivable so long as organisations are also implementing evidence-based initiatives to support a targeted plan and drive meaningful improvements.

Regardless, it’s clear that UK businesses still have a long way to go. Our research echoes this frustrating state of affairs: it’s no surprise that more money and more recognition are the most in-demand benefits among women when asked how employers could increase their workplace happiness.

Despite women being paid less, they are actually happier and more enthusiastic at work compared with men, with just 34.5% of male employees saying they often feel happy at work. This is just as concerning and is something that British businesses must explore further and work to improve.

Closing the gender pay gap and the gender happiness gap requires businesses to ask themselves some difficult questions, and a willingness to act if they discover less-than-satisfactory responses. Making progress will undoubtedly require changes to culture and strategy, but if businesses can make sure they’re communicating openly with their employees around both pay and happiness, everyone will benefit.

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‘There’s a strong business case for closing the gap’

Ornella Nsio, policy adviser at the Recruitment & Employment Confederation:

It is disappointing to see that there has been little change in the UK’s gender pay gap figures from last year, although we understand that progress will take time. Research estimates that £150bn in GDP could be raised by closing the gender pay gap. It is vital that the UK’s businesses continue to strive to close it – not just because it’s the right thing to do, but also because of the strong business case for it.

As skills shortages continue to worsen, employers will have to look to under-represented groups to fill vacancies, and they will only attract those candidates by using inclusive recruitment practices such as advertising roles on a wide variety of platforms and offering flexible working as standard for all roles. Recruitment agencies are helping their clients to take tangible steps to promote diversity and inclusion in the workplace and help the UK’s economy to thrive.

‘Employees should demand action’

Charles Cotton, senior reward and performance adviser for the CIPD:

It’s time for action. The numbers are what they are, it’s the action that businesses take that matters.

Organisations need to work with their workforce to understand what is preventing women from being able to progress and share a clear action plan to redress the balance. Equally, employees should be curious about their organisation’s gender pay gaps and demand action in order to create fairer workplaces.

This is fundamentally an exercise in fairness. While we may not expect a significant fall in gender pay gaps in the first few years, fast forward a decade and there will definitely be questions asked if companies are still failing to close the gender pay gap.

‘Businesses should use a pay gap reporting tool’

Laura Timms, product strategy manager at MHR Analytics:

Narrowing the gap will require detailed analysis of the numbers, as well as evidence-based planning. Companies will need to assess the complex underlying factors behind their pay gaps.

Once a company has identified a pay gap they will then have to spend time trying to aggregate their data to understand the nature of the gap. Manually analysing employee payroll data can be an extremely tedious process involving the management of multiple spreadsheets.

An easier approach is to use a gender pay gap reporting tool, to eliminate time intensive manual processing and help businesses understand what’s really going on within their organisation.

Gender pay gap reporting analytics software enables companies to see salary distributions to pinpoint the key drivers which are influencing their pay gap. This gives them the power to understand how their pay gap fluctuates across different locations, departments and job roles.

Once companies are clear on why they have a pay gap, they can act with confidence, carrying out special initiatives to level out the playing field, for example introducing schemes that encourage women to apply for management positions, promoting flexible working and hosting internal campaigns around equality in the workplace.

‘Celebrate success but do the deep dive’

Justine Woolf, director of consulting at Innecto Reward Consulting: 

What’s really striking this year is the importance of the narrative. Companies should focus on making the comparison to last year’s results, celebrating success where appropriate and explaining without excuses.

Doing a “deep dive” analysis, then communicating the complexity which sits behind your results, is vital for giving a full and fair picture of pay at your organisation.

‘Last-minute rush will lead to mistakes’

Clare Parkinson, pay and reward manager, Croner

A number of organisations have left the publication of their gender pay gap statistics until the final minute, so in the rush to get these results published on the government’s website there may be some parts of the reporting requirements that are going unnoticed.

Failing to give these reporting requirements the time they need to work through staff pay data and undertake the complex calculations will lead to errors being made, whether through human error as numbers are wrongly typed into a spreadsheet calculator or because those who are reporting for the first time are failing to comprehend the extent of the regulations.

Employers may be loath to contract out the calculation process or pay for software which can run the calculations for them – but this can be the difference between complying with the law or breaking it.

‘Invest in education and care’

Hannah Peaker, chief of staff for the Women’s Equality Party, which conducted its own analysis, finding that 20% of finance and insurance companies reporting a narrowed gap had increased their bonus gaps

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Today’s data has shown that nearly half of the organisations that reported had worse pay gaps than last year. We were very clear that sanctions and investment in care were crucial elements of closing the gender pay gap when the government introduced pay gap reporting.

We created the Women’s Equality Party because closing the gender pay gap requires changing our education system so that girls are not funnelled into lower paying jobs, investing in childcare so that women are not forced to opt out of the workplace in order to raise a family and improving women’s representation in business and in politics so that decisions are beneficial to everyone. Pay gap reporting is only the beginning.