Gender pay gap reporting: year two

Gender pay gap reporting: year two

With the deadline for gender pay gap reporting just gone, what have we discovered from the second year of this new law?

What is gender pay gap reporting?

In a concerted effort to address the pay inequality between men and women, the Government announced in 2017 that all businesses with over 250 employees must report on their gender pay gap – the difference in earnings between male and female members of staff.  The first reports published in April 2018 received a flurry of media attention and equally the 2019 reports are greatly anticipated.

Organisations are required to report their gender pay gap online via a portal on the gov.uk website and on their own website. Their reports must show:

  • Median gender pay gap figures
  • Mean gender pay gap figures
  • The proportion of men and women in each quartile of the pay structure
  • The gender pay gaps for any bonuses paid out during the year

Why report on pay gaps?

The theory behind pay gap reporting is that by forcing organisations to publicly divulge this information, they will be under greater scrutiny and encouraged to ensure their pay gap is negligible (or at least improved upon). The threat of enduring negative press and the impact this can have on retaining and recruiting employees may well be an effective mechanism to kick start some level of change.

Given the potential for negative press, some organisations reporting gender pay gaps have opted to provide detailed narratives to accompany their reports, with a view to providing context and an explanation for the differences in pay. This narrative may also be a useful tool to potentially communicate with staff and explain why the gap exists now, show that it is being addressed and explain what steps are being taken, demonstrating that employers take the pay gap seriously.

What can we learn from the published reports?

The first reports in 2018 highlighted the extent of the differences that existed across sectors. Many employers were quick to defend their pay gaps, stating that comparing salaries of different jobs created an unrealistic view of the gap within their business.

easyJet’s gender pay gap figures provided a prime example of how this context can influence the perception of reported pay gaps. easyJet’s pay gap shows men being paid 51.7% more than women, which on the face of it appears significant. However, easyJet have sought to highlight the large difference in Pilot pay compared with Cabin Crew pay.  easyJet pointed out that it is a fact that the large majority of individuals qualifying as Pilots are male, and a large proportion of Cabin Crew are female, and it’s a fact that Pilots are paid significantly more than Crew. easyJet stated that this results in an artificially high and misleading pay gap, as the pay gap reporting fails to identify the gap between people doing similar work.

A positive outcome of the reporting obligation is that easyJet is now committed to ensuring women make up at least one-fifth of all new pilot recruits by 2020 in a bid to close the gap.

New year, new set of reports

The Office of National Statistics (ONS) has recently reported that the overall pay gap has reduced to a low of 17.9% in 2018, so the UK is heading in the right direction. However, the TUC has claimed that at the current rate of closure, it would take half a century to reach parity for men and women.  Evidently, there is still a way to go. We anticipate that the Government will extend reporting to address the ethnic minority pay gaps in the near future and potentially remove the 250-employee threshold for gender pay gap reporting.

This year’s deadline of 4 April 2019 for pay gap reporting is fast approaching and from those released so far, differences from last year’s reports are already becoming apparent.

Many businesses are taking advantage of the option of providing a non-compulsory narrative and setting out an action plan to put their gender pay gap in context. A variety of explanations are being put forward by employers to explain why their pay gap has, or has not, moved over the course of the past year.

Some organisations have said that family friendly measures such as encouraging flexible and part-time working have attracted more women than men, and this has affected their pay gap. The FCA for example has announced that 39% of their senior leaders were now female, with a target to increase this to 45% by 2020 and 50% by 2025.

Top tips for businesses

By providing a narrative and action plan, employers can focus on the positive steps they are taking to either improve their pay gap, or at least explain it, in the context of other positive changes that have been put in place.

A report by the Equalities and Human Rights Commission, the body responsible for monitoring and enforcing the gender pay gap reporting legislation, states that 20% of employers have produced an action plan and 11% have set targets. Publishing accompanying narrative reports and action plans can help employers to:

  • attract and retain employees through a visible commitment to addressing the gender pay gap that showcases the organisation as fair and progressive
  • communicate a positive statement of intent to customers, shareholders and other stakeholders, helping to enhance reputation and brand awareness
  • provide the basis of meaningful employee engagement on the gender pay gap, building trust and securing buy-in for any proposed solutions

Pay gap reporting need not be bad news for employers if they take effective steps to communicate with staff, shareholders and clients. We recommend employers use gender pay gap reporting along with training and equality and diversity policies to evidence that proactive steps have been taken to seek equality and diversity. This will benefit employers who obviously want to attract and retain the best staff whilst minimising the risks of successful discrimination claims.

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