UK: Government, investor and media focus on gender pay gap reporting

Large private sector employers are required to publish their gender pay gap data by 4 April 2018.  However, in the last couple of months pressure has been put on employers to publish early, a call endorsed by the Prime Minister personally at the end of October.  At that point only around 2% had done so;  this has now increased to around 3.5%.  The Prime Minister also called for smaller employers (with fewer than 250 employees) to publish voluntarily, and encouraged employers to take steps to reduce the pay gap, by improving the pipeline to ensure progress on female representation at senior levels, including offering return to work schemes, and by advertising all jobs as open to flexible working arrangements from day one, unless there are ‘solid business reasons not to’.

Listed companies should note that the 2018 revised Investment Association principles of remuneration published in early November state that shareholders expect remuneration committees to provide the gender pay gap numbers in the context of the business and fully explain why the figures are appropriate.

For those employers looking to develop action plans to tackle their gender pay gaps, the Government Equalities Office has recently launched a toolkit which suggests committing to three priority actions from their action list.  Their potential action list covers the following areas:

  • recruitment: ensure jobs adverts have gender-neutral language and are advertised as flexible by default;  where there is occupational gender imbalance, consider recruiting through a wider variety of channels;  remove bias by introducing a structured scoring system and skill-based tests; require hiring managers to justify hiring and salary decisions.  (A recent study of British recruitment adverts (reported here) has revealed extensive use of gender-biased language which decreases the likelihood of job applications from female candidates.)
  • flexible working: design every job as flexible by default, advertise every job as flexible from day one, and examine and remove barriers to flexible working.
  • parental leave and returners:  if maternity pay is enhanced, consider offering enhanced pay for shared parental leave (SPL) and paternity leave as well; encourage take-up of SPL and maintain contact during leave; implement returner programmes.
  • pay, reward and promotion:  ensure pay and reward structures are underpinned by job evaluation and that negotiated individual levels of pay are contained within pay grades; perform annual equal pay audits; require managers to justify decisions and show they offered roles and development opportunities to all staff with similar performance; review distribution of performance ratings between men and women; introduce sponsorship schemes including for lower-paid groups.

The Government recently published the results of research into employer attitudes and expected approach to the gender pay gap reporting regulations.  As at Spring 2017, only 20% of employers intended to publish additional information alongside the mandatory reporting and for most this was to be narrative commentary on the results; only a third of those who had or intended to develop a plan to reduce their pay gap intended to publish this externally.  Many of the interviewees were delaying publishing their data until others had done so in order to see how other organisations presented and explained the data. The greatest perceived barrier to reducing the gender pay gap was difficulty attracting women to the organisation or to certain roles, with these issues mostly prevalent in the construction, manufacturing and financial sectors.

Of the employers who published their figures on the government website by mid-November, around 40% included links to more detailed reports on their own websites, most of these choosing to explain their pay gap (usually, under-representation of women at senior levels or in specific occupations) and around half setting out initiatives to tackle it.  Clients currently considering their own reports may be interested in our updated analysis of the reports published by mid-November, available on request.  This analysis covers the common reasons given for gaps, the types of additional data included voluntarily to explain gaps, the types of initiatives included in stated action plans, and the approaches taken by group companies to providing consolidated figures.

While most media reporting has focussed only on the figures produced by a few high-profile employers, the FT has recently named 15 employers reporting zero mean and median gender pay gaps and eight with identical proportions of men and women in all four pay quartiles;  this is stated to be statistically improbable and therefore almost certainly inaccurate.  (Although not covered by the FT, two companies have also inaccurately calculated their bonus gaps as over 100% – the gap is the difference between the male and female bonus pay amounts expressed as a percentage of the male bonus pay and therefore can’t be more than 100%, although it could be a higher negative figure where women receive higher bonuses on average.) The article notes that one company substantially revised its figures when this was pointed out.  This coverage highlights the importance of ensuring that data has been accurately collected and verified before publication, particularly if reporting a zero or minimal gap likely to attract attention from the media and ultimately the Equalities and Human Rights Commission (which has investigation and enforcement powers).

Finally on this issue (although Brexit may limit its relevance in the UK), the European Commission has outlined an action plan to ‘step up’ ongoing measures to tackle the gender pay gap in 2018/19. The plan includes eight areas the Commission intends to prioritise for action, such as improving the application of the equal pay principle, greater pay transparency, and initiatives to tackle occupational, sectoral and vertical segregation.

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Filed under Jurisdiction: UK, Remuneration (including bonus and incentive plans), Workplace culture, diversity and discrimination (including bullying and harassment)

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