Counting the Cost of Unequal Pay

As of April 2017, UK organisations with more than 250 employees will be required to publish the difference in pay between male and female staff on their website. It’s part of a drive by the Government to close the gender pay gap within one generation. Are you ready?

Employers will be given one year from the first annual reporting date of 30 April 2017 in which to publish their data and correct any disparity before the next annual report. There are plans to name and shame the worst offenders in a league table in 2018.

The legislation affects those who ordinarily work in Great Britain and whose contract of employment is governed by UK legislation.

Speaking about the draft legislation, Vanda Murray, Criticaleye Board Mentor and Non-executive Director at FTSE 100 distribution and outsourcing company Bunzl, where she chairs the Remuneration Committee, says: “It will draw attention to those companies that are not paying equally and they will have to do something about it.

“How big an issue it will be for those companies will depend on individual cases, but certainly they will need to act quickly to address any imbalances that they have.”

To help, the Government is rolling out a £500,000 package to support companies implement the regulations, including UK-wide conferences, free online software and support for male dominated-industries, such as technology and engineering, but the onus is on the employer to take action.

It’s hugely important to get the board involved in this right away. Jamie Wilson, Managing Director at Criticaleye, says: “That’s not just because of potential bad publicity, but because it should serve to fuel a cultural shift in organisations that need it. When the culture is skewed so strongly in one direction it probably indicates that there are much wider issues for the company than just that of pay.”

Yetunde Hofmann, Non-executive Director at the Chartered Institute of Personnel and Development (CIPD), advises: “Take the opportunity to review, revise and realign. CEOs would be wise to commission internal research looking at statistics, history and trends throughout the organisation.”

Challenges and concerns

The data is to be reported using five calculations including the mean and median differences, quartile figures and two calculations on bonuses. “With these five different measures, I don’t think there’s a lot of hiding room for employers. Everyone is quite surprised at the detail and amount of work that’s going to be involved,” says Elizabeth Lang, Partner at international law firm, Bird & Bird. “Because the data is going to be cut in so many different directions, the only way employers will be able close to the gap comprehensively is by addressing the issue.”

It will take a sizable chunk of time and money, Elizabeth explains: “Every individual’s numbers are going to have be calculated individually, so when you’re dealing with 250 or more employees, it is going to be a big administrative burden.”

Even those that already collate such data may be surprised by the severity of the gap. Under a previous voluntary gender pay gap reporting scheme set up by the Government in 2011, about 275 employers signed up, yet only five went on to publish their pay gap information.

One of the biggest concerns regarding pay gap reporting is how that data will be presented, which is something yet to be ironed out.

Mel Rowlands, Deputy Group General Counsel and Company Secretary at FTSE 100 company Smiths Group, says: “I think the problem with the requirements is that they don’t take into account different businesses and the way men and women lean towards certain roles within them. The challenge for businesses will be to explain their figures properly so that their statistics are not read out of context or with them seeming defensive. For example, I can see this being an issue for businesses with high proportions of male engineers versus high proportions of female call centre staff.”

Supporting this view, Jamie at Criticaleye says: “In principle, it’s a step in the right direction, but these sorts of initiatives are always more complex than they appear so great care must be taken in the actual reporting of the statistics.”

There are no legal penalties for non-compliance and any ramifications will mostly be reputational. “Having a gender pay gap does not mean that there is any unlawful activity going on within an organisation because there can be a number of valid reasons for having a disparity in pay. That’s very important to understand,” Elizabeth says.

Taking action

One might think the simplest and fairest option for companies to avoid a bad reputation or threat of tribunal would be to make the necessary adjustments to remuneration, but it may not be that easy. Steven Cooper, Chief Executive of Personal Banking for the UK and Europe at Barclays, explains: “Should there be a gender pay gap, one of the challenges would be the increasing cost base, but you must have equality otherwise what does that say about the values of the business and how you treat people?”

A slower yet less costly way to tackle it could be to focus on the new hires as they naturally enter the organisation, providing them with equal pay under transparent polices. “But even that is not black and white,” Yetunde from CIPD points out. “You might want to increase diversity in the business and hire a woman on the basis of her potential, someone who hasn’t quite demonstrated the track record of another seasoned candidate who just happens to be a man. Do you pay her the same on the basis of equal pay or less, but offer a great development programme?”

While the regulation is a great step towards pay equality, the issue is much bigger, as Mel notes. “This legislation doesn’t really address the wider need to look at why there is little diversity in certain industries and women aren’t represented at senior levels across all businesses,” she says.

Steven adds: “At Barclays, we have gender parity on pay, but the issue we still need to talk about is gender parity on roles… Our employee split is 51 per cent male to 49 per cent female and we look at that very closely. What skews it is that we have more men at the most senior positions and we are trying to get a better balance on that.”

It’s evident that gender equality in the workplace is not just about pay. As Mel points out: “Boards need to be up to speed with a number of new rules and regulations that are coming into effect around culture and social responsibility − and the new gender diversity rules are just part of that.”

Find out more about the gender pay gap legislation, how to report it, and what it means to your business 

Or, join our next Women in Leadership event.

By Mary-Anne Baldwin, Editor, Corporate

What are your thoughts on the new legislation? If you have an opinion that you’d like to share, please email Mary-Anne on: maryanne@criticaleye.com

https://twitter.com/criticaleyeuk

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s