In July, Prime Minister David Cameron announced new regulations requiring large private and voluntary sector employers to publish their gender pay gap information. The aim of the regulations is simple – to reduce the current 19.1% gender pay gap and ensure women are paid the same as their male counterparts when working in the same role.
The new regulations are likely to affect approximately 8,000 employers who between them employ around 40% of the working population. The mandatory rules are expected to come into effect as early as spring 2016, so employers need to start preparing for them now.
Our research among large UK businesses found that just 16% of employers were concerned that their pay arrangements may be influenced by the gender of their employees. However, 61% thought that the new rules would encourage their organisation to take action to close their gender pay gap, with 70% believing employees would question the reason for their rate of pay, and 42% thinking that formal employment tribunal claims would be pursued against their organisation.
It is interesting to note that while relatively few respondents think gender is a reason for their pay gap, a much higher proportion believe publishing their gender pay details will prompt positive action to address the situation or cause employees to question and/or challenge their rate of pay.
Calling for transparency
The Government appears to be looking at three different options: a requirement to publish an overall gender pay gap figure; details broken down by full- and part-time employees; and details broken down by grade or job type.
Many employers are concerned that publishing a gender pay gap figure based on an average across their organisation would be too simplistic, and that in order to be meaningful, more complex reporting is required. However, identifying comparable jobs within an organisation is fraught with difficulty, as we frequently see when dealing with mass equal pay claims. Only four in 10 of our respondents believed that employees on the same grade were doing comparable jobs, and if this is the case, calculating the gender pay gap by grade may not just be meaningless, but potentially also misleading.
Employers will be put to a lot of work in analysing and publishing information which is meaningful in the context of their particular organisation. Given the emphasis placed on pay equality in the Prime Minister’s speech to the recent Conservative Party Conference, this is an issue that will continue to attract attention.
Organisations whose gender pay gap is bigger than the national or industry average will need to have an understanding of the reasons for this and be able to provide an explanation. Whilst failing to publish gender pay gap details may be a consideration for some as it involves the incurrence of a £5,000 fine, the attention this draws to the organisation’s position on gender pay could prove to be more damaging than the publication could have been.
Steps to follow when reporting on gender pay gaps:
- Calculate the organisation’s overall gender pay gap on a ‘median’ basis and compare the results to the national and/or industry average. It is important to understand whether the results, if published, could be viewed as indicative of a significant gender pay problem.
- Consider how best to conduct further analysis to understand the reason for the gender pay differences within the organisation as a whole – or within particular grades, departments, or job roles where applicable. This is clearly more important where the overall pay gap is likely to be viewed as indicative of a significant gender pay problem.
- Carefully consider the reason for the results of the analysis. For example, what could be interpreted as an unacceptable situation may be a result of a lack of communication.
- Recognising a problem and establishing a means of addressing it may help to avoid a formal challenge or in defending such a challenge. Care is however required to avoid highlighting a problem in a way that invites a formal challenge.