Gender pay reporting: An opportunity to audit and address, rather than a threat

Newsletter articles

20 Dec 2016

 HR Insight Issue 23

Duncan Brown, Head of HR Consultancy

The finalised gender pay reporting regulations were published on 7 December, and with reporting commencing in April 2017, employers with more than 250 employees are having to sit up and take notice.

But just what will the impact of the new regulations be? Activists such as the Fawcett Society [1] and even Parliament’s own Women and Equalities Committee [2] have criticised the draft regulations for being too limited to have any real impact on the UK’s 19 per cent mean earnings gap. They support more wide-ranging initiatives such as the compulsory equal-pay auditing and action plans required in a number of European states (and the public sector in Wales), and now proposed under similar legislation in Germany. They also highlight the need to address the vertical segregation which means that two-thirds of the UK’s low-paid employees are female while over two-thirds of high-earning executives are men.

Employers meanwhile have had worries about the regulations – principally of encouraging equal pay claims (41%) and causing reputational damage by being ranked in dreaded ‘league tables’ (61%) [3]. But the latest (as yet unpublished) research by the GW4 research consortia [4] amongst 120 employers suggests that the penny is finally dropping. Although fewer than 10 per cent of private sector employers have carried out an audit of their gender pay gaps, 70 per cent are planning to do so and one fifth considering direct action to close the gaps found, as Essex University has recently done [5].

IES is uniquely placed to comment and advise on gender pay, and our expertise intersects in these three areas:

• Academic research on the causes of gaps and possible solutions: Our report, Tackling Gender Disability and Ethnicity Pay Gaps: A Progress Review, for the EHRC will be published shortly.
• Government and parliamentary policy input: We gave evidence this year to the Women and Equalities Select Committee on the gender pay gap report [6].
• Employer practice: We have advised a wide range of employers, from local authorities through to major industrial and retail companies, on how best to audit and address gender pay gaps.

The publication of gender pay data only makes the auditing and analysis of each employers’ pay data doubly essential, for how can you ever address a problem if you don’t know its scale nor understand its causation? Our methodology loosely follows the recently updated five-stage audit process recommended by the EHRC [7].

Particularly in larger employers, however, we often phase the analysis. This means initially focusing on some core statistics, such as those that the reporting regulations specify, to answer basic questions such as:

• What are the gaps?
• Where are they located?
• Do we have a problem?

We then move on to more detailed analysis to determine their causation and consider possible solutions and actions. Is it the case, as one financial services organisation found, that the organisation tends to recruit men on higher salaries than women and import market biases? Is the issue, as a FTSE 100 company found, that part-time workers get lower performance ratings on average than full-time workers? Or is it the lack of women at senior levels, which gave one public sector employer the additional impetus to drive a range of initiatives to create a more diverse leadership cadre?

We believe reporting regulations will also further chip away at the traditional focus by employers on secrecy and carrying out audits under legal privilege. In our experience, an effective programme of action requires involvement, understanding, and buy-in from all key stakeholders in an organisation.

The Managing Partner of PwC, one of the few employers to voluntarily publish its gender pay breakdown, says that you can’t effectively manage something unless you can measure and understand it. We believe employers should have nothing to fear from compulsory reporting and voluntary gender pay auditing, but rather have many business benefits to gain.

For more information on equal pay and carrying out an audit, contact: duncan.brown@employment-studies.co.uk