While a useful first step to addressing pay disparities, the UK gender pay gap reporting requirement can be seen as a blunt instrument. Employers must go further and develop action plans if they are serious about addressing their gaps, writes Monica Atwal.
Gender pay gap reporting has been in place in the UK since April 2017 for private sector employers with over 250 employees, and pay inequality between the genders has been illegal in the UK since 1970.
As every gender pay report is at pains to set out, the gender pay gap and equal pay are different issues and one does not equate to the other. Yet, broadly, women are paid less than men in comparable roles, underrepresented in more lucrative and senior roles, and where they are employed in abundance their roles attract a lower salary and they experience barriers to progression.
The Financial Times reported last year that nine out of 10 women work for a company that pays its female workforce less than its male workforce, as a whole.
The Office for National Statistics has reported the gender pay gap for 2020, but one of the issues is that its analysis is based on snapshot data from 5 April 2020 when approximately 8.8 million employees were furloughed. Â Among full-time employees the gender pay gap was 7.4%, down from 9.0%, and for all employees the gender pay gap was 15.5% in 2020, down from 17.4%.
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Another issue is that the UK gender pay gap reporting legislation is a blunt tool and employers are able to exclude data from their reports as a result of corporate structures.
The reasons for pay disparity are complex and numerous, and may also be driven by other social factors and protected characteristics. It is interesting to note that there does not appear to be a disparity between average pay for men and women under 40, but this is before the childcare imbalance is truly felt, which the Employment Appeal Tribunal this year confirmed still exists and does not need to be proven in an indirect sex discrimination claim.
This month the Global Institute for Women’s Leadership at King’s College London and The Fawcett Society analysed gender pay reporting systems across six developed countries. The UK was in joint last place in terms of effectiveness while Spain’s system was graded the best.
Our system is useful to assess broad data, but the report found a fundamental issue with the UK legislation: it does not compel organisations to produce action plans for addressing disparities and there is no requirement for employers that do have gender pay gaps to close them. For example, in France employers are required to close any gap within three years.
The other main recommendation was to reduce the employee threshold:Â other countries had a median reporting threshold of 50 employees.
The pandemic has changed the way we work and the balance of work/family commitments. It has accelerated the use of technology, and businesses now have considerable data at their disposal to make assessments about how staff are paid. Therefore, companies are at a pivotal point of being able to tackle pay disparity, joining up current initiatives and delivering plans with clear goals and timelines.
Overcoming pay disparity requires detailed plans with investment in:
- Transparency over pay
- Recruitment practices, including initiatives at community/school level, the outlining the objectives and requirements for a role, and the removal of barriers
- Pay and progression audits that assess pay, promotion and bonuses; the subjective criteria used to evaluate performance; and opportunities given to employees. This analysis should include consideration of all 10 protected characteristics and social background
- Maternity, paternity, parental and childcare provision
- Flexible working arrangements
- The setting of goals or targets for different demographics at all levels, and analysis around why groups are underrepresented. Organisations should provide a platform for all staff to achieve their career aspirations and consider tailoring development opportunities for different groups.
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McKinsey & Company has reported what businesses already know: diverse companies outperform their competitors and produce better financial results. It is the diversity of thought from those with varied backgrounds that will drive innovation and performance – and this diversity will not be achieved by reporting on gender pay data alone.
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