Gender pay gap – the next steps?

25 October 2018

This article was featured in the November 2018 issue of the magazine.

Samantha Mann MAAT MCIPPDip, CIPP senior policy and research officer, reviews recent developments, recommendations, reports and guidance

It would appear that achieving 100% compliance in the first year of operation is simply not enough for the Business, Energy and Industrial Strategy (BEIS) committee who published their report on gender pay gap reporting in the summer, as they made a number of recommendations for change. 

 

Improving gender equality in organisations

Before I go on to consider some of those changes – particularly those that will have the biggest impact on our profession – let  us first take a quick look at some of the suggestions from the Government Equalities Office and the Behavioural Insights Team that demonstrate what actions employers can take in order to achieve a reduction in their gender pay gaps. 

The guidance – which is set out in the report, Reducing the gender pay gap and improving gender equality in organisations: Evidence-based actions for employers (https://bit.ly/2Az0Kri) – details successful approaches that have been taken and confirms, if such confirmation is needed, the importance of using high quality data to achieve successful outcomes.

Actions that have proven to be effective include:

• use skill-based assessments with standardised tasks during recruitment

• use structured interviews during recruitment and promotion as unstructured interviews increase the likelihood of unfair bias influencing decisions

• encourage salary negotiations by showing salary ranges – this helps applicants to know what they can reasonably expect – research has proven that women are less likely to negotiate their pay

• introduce transparency into pay and reward processes

• appoint diversity managers and/or diversity task forces 

• include more women in shortlists for recruitment and promotion.

The guidance also includes a number of actions that show promise but require further research to improve the evidence base of their effectiveness:

• improve workplace flexibility for men and women – and up to a senior level

• encourage the take-up of shared parental leave

• recruit returners who have previously taken an extended career break for caring or other reasons

• set internal, specific and time-bound targets detailing what change will be achieved and by when (a point that the BEIS committee also recognise in their report).

Actions that have shown to have both positive and negative impacts and require further research as to their effectiveness:

• unconscious bias training

• diversity training on its own is unlikely to change behaviour

• leadership development training

• performance self-assessments 

• diverse selection panels.

In its report, Gender pay gap reporting (https://bit.ly/2LR2D7p), the BEIS committee considered briefly what actions should be taken to actively reduce gender pay gaps but sought to focus on the experiences during the roll-out of gender pay gap policy and heard from a number of witnesses as to the effectiveness of this policy. 

The report has focussed on businesses, but the committee acknowledge that it equally applies to the public and voluntary sectors.

 

Recap on the reporting requirements

Regulations currently require organisations with more than 250 employees to provide statistics on:

• their mean gender pay gap 

• their median gender pay gap

• their mean bonus gender pay gap

• their median bonus gender pay gap

• the proportion of men and women in the organisation receiving a bonus payment, and 

• the proportion of men and women in each quartile pay band.

As we race through the second reporting year we are now working to the snapshot dates of 31 March 2018 in the public sector and 5 April 2018 in the private and voluntary sectors.

Reporting organisations together employ approximately 16.45 million people, which represents 56% of all employee jobs in the UK. 

 

...further research to improve the evidence base of their effectiveness...

 

Widening the reporting requirements

Previous and early consultation had considered the size of employer that should engage in gender pay gap reporting and had discounted employers smaller than 250 employees for a number of reasons, not least being the administrative burden that would fall on smaller employers. However, there are a growing number of software products and tools available to support employers with this reporting and so the committee recommend that the qualifying threshold be reduced to include organisations with 50 employees. 

The timescale for delivery for this recommendation recognised the need for more time to be given to smaller organisations to enable them to prepare, and further recommended that the government provide the necessary support, particularly in terms of guidance, to smooth this transition.

 

Treatment of partner pay

The committee believe that there was one issue that should be clarified at the earliest possible opportunity and that is the way in which the remuneration of equity partners is included in the gender pay figures.

The guidance published alongside the legislation did not require the pay of equity partners in limited liability partnerships (LLPs) to be included in the calculations, as they are not employees in receipt of a salary but instead receive a share of the profits made. However, the committee felt that to exclude these partners gives a misleading impression of the size of the pay gap and by omitting the highest paid people in organisations makes a nonsense of efforts to understand the scale of, and reasons behind, the gender pay gap.

The committee believe that the government was wrong to omit the remuneration of partners from the figures required and agreed with witnesses that the initial lack of clarity was unhelpful. As such they recommend that the government uses the guidance to clarify how data on partner pay should be calculated and included in time for the publication of data next year.

 

Data on ethnicity and disability

Witnesses, together with research, advanced the argument to the committee that “women with multiple protected characteristics tend to experience greater gender pay gaps”; however, by how much can only be revealed if the relevant data is collated and published.

A more generous period of roll out, together with ample consultation, has been recommended to support the committee’s suggestion that the requirement to collect and report pay gap data in respect of disability and ethnicity be introduced by 2020.

 

Impact of part-time working

The committee recommend that when the regulations are amended both part-time and full-time gender pay gap statistics are required to be published. It is hoped that as a result of these additional measures, businesses would be encouraged to adapt to the growing prevalence of flexible working, more evenly shared caring responsibilities and multi-job careers and be able to demonstrate that part-time workers can expect to be fairly rewarded and also reach the top. 

The committee further recommend that when the regulations are amended, the way in which bonus calculations are made is altered to reflect a pro rata basis and that this change is accompanied with clear guidance on the method of calculation.

 

...omitting the highest paid people in organisations makes a nonsense of efforts to understand the scale...

 

Increased granularity

Witnesses provided a mixed response as to the usefulness of the quartiles; however, the committee agreed that additional granularity in the figures would be helpful and would not require significant additional work to produce. Accordingly, they have recommended that when the regulations are amended, the requirement for information on salary quartiles is changed to deciles.

 

The role of the EHRC

The Equality and Human Rights Commission (EHRC) reported that all employers that were thought to be in scope of the regulations, have published their gender pay gap figures.

The committee believe that to prove full compliance has been achieved each year it is important that all qualifying organisations are known. An initial list has now been established and the committee have recommended that the government publish and maintain a definitive list of all organisations that fall within the scope of the gender pay gap legislation.

The government was also criticised for failing to provide legal certainty as to the available enforcement mechanisms and sanctions for breaches of the regulations. It has been recommended that the government, at the next available opportunity, ends the legal uncertainty surrounding the EHRC’s enforcement powers by providing for specified fines for non-compliance.

 

The promise of change continues

As you can see there are a significant number of recommendations being made which, if accepted by government, will see change being introduced into regulations that build on lessons learned during the first year of gender pay gap reporting. 

 

What do you think? Do you agree? Let us know at [email protected]. 

As with so many subjects, there is always so much more yet to occur, and this is a policy area that has a way to go yet to narrow the UK’s gender pay gap. 

The Government Equalities Office together with the Gender and Behavioural Insights team will be working to develop more evidence on what actions work. If you represent an organisation with 4,000 or more employees in the UK and would like to partner with them, please contact the Gender and Behavioural Insight programme at [email protected].