Analysing the pay gap

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2018 also saw greater focus on transparency in pay for men and women with the call for the BBC to address differing pay and Tesco facing equal pay claims with a potential value of up to £4 billion. Importantly, what happened on 5 April 2018 cannot be ignored. This marked the final deadline for the first mandatory gender pay gap report for businesses with 250 employees or more. This has long been in the pipeline with Lisa Kelly reporting on this in February  2016 and again in December 2016.

Now that the reports are out there we have the opportunity to reflect on the trends shown and where things may go from here.

1. Sector gaps

It was no huge surprise that the construction and finance sectors showed the biggest pay gaps. However, professional service and consultancy firms, particularly in London, also fared badly. It is interesting that some of the companies advising on gender pay gap reporting actually showed some of the largest pay gaps.

2. Uneven distribution across the workforce

Having said this, many employers stated clearly in their reports that having a gender pay gap in their report is not the same as paying men and women differently for the same or similar work. Most employers explained that their gaps resulted from uneven distribution of men and women across the highest and lowest paid brackets of the workforce. This, therefore, is likely to put pressure on businesses to try to get more women on their senior management and leadership teams. Also there will increasingly be greater focus on why key female talent might drop out of the workforce, or fail to progress, e.g. after having children.

3. Bonus gap worse than salary

In many cases the bonus gap was worse than the salary/pay gap. Facebook reported a bonus gap of 41.5% and one London employer had an 84.6% bonus gap. It would be interesting to understand further details around what these bonuses rewarded; for example, could it be linked to long working hours which working mothers may find difficult to match?

4. So where will things go from here?

Firstly, we note that the Equality and Human Rights Commission has said it will take enforcement action against employers who don’t report by 5 April 2018 or report inaccurately or in a misleading way. Although they did write to employers that failed to report, to date we have not seen any further enforcement action and so it remains to be seen whether this will be followed through. What is more likely to happen is that each reporting year will result in increasing press scrutiny and media pressure for employers to take action and adhere to any promises made in the previous report.

An interesting angle that is gradually being highlighted is the difference women and men take to approaching recruitment and salary reviews. There is a suggestion that when asked in interview what they are currently paid, women are more likely to be honest and modest, whereas men may inflate their pay as a negotiation tactic. This in turn can result in women being recruited on a lower salary, perpetuating the gender pay gap. This was highlighted by Emma Walmsley who took over as Chief Executive of GlaxoSmithKline on a salary of 25% less than her male predecessor. No matter what your views are on this, it may be an area which legislation will cover in future on the basis that an employer should fix the pay expectations in advance of the recruitment process.

Inclusive, flexible workplace culture recommended

At the beginning of August 2018 a focus committee of MPs recommended to government that partners’ pay should be reported (currently not counted as they are not ‘employees’) and that companies with 50 employees or more should now be required to report by 2020. At the same time Laura Hinton, Chief People Officer for PwC, gave evidence saying that more robust action and accountability was required and that “creating an inclusive culture, where flexibility is embraced by all and leaders are responsible for setting a clear tone from the top, is the vital ingredient in driving action”.

For further information, help or advice please call Frances Cameron on 0191 211 7970 or email [email protected].