Pay gap and employee benefits
12 March 2018
This article was featured in the April 2018 issue of the magazine.
Iain McMath, chief executive officer of Sodexo Engage, identifies problems with gender pay gap figures, asserts reporting must not risk employee benefits, and offers advice
We’re only just getting started this new year, but a lot of people in human resources are bracing themselves for a turbulent few months. The reason? April’s deadline for publishing the first gender pay gap reports. Every business with at least 250 staff has to give numbers of male and female employees – and the difference in their pay. At the time of writing, few businesses had published their reports. As more come in, there could be some nasty surprises ahead. Any move to level the playing field between men and women is a good one. If the reports expose businesses treating female staff unfairly, that’s no bad thing. They should have nowhere to hide.But it’s the unintended consequences we must look out for, and, in this case, they could be quite serious. There are two big problems with pay gap reporting:
first, it’s a blunt instrument to address a complex problem
second, and more worryingly, reporting can actually discourage efforts to make work more family-friendly.
Lies, damned lies and statistics
The most obvious issue with the reports is that the figures lack context. Businesses can include an explanation of why they have a pay gap – other than sexism, that is. But the press (and Twitter) probably won’t read it. Instead, they’re going to jump on figures published on the government’s website: “Women’s hourly rate is 11.9% lower” and “Women’s bonus pay is 27.2% lower”, to take one company’s entry at random. But these figures don’t reflect the total remuneration of staff. It’s impossible to know whether staff are paid differently or if they just choose to take their pay in different ways – some as full salary and others as a combination of salary and benefits. Another issue is pensions. April also marks the start of rises in the minimum contribution rates under automatic enrolment. Employees will have to jack up their contributions from one per cent to three per cent, and then again to five per cent from April 2019. If businesses find more men than women opting out of schemes as a result, they’ll have a worsening pay gap through no fault of their own. And what about companies that are promoting a healthy work-life balance? The eye-watering costs of childcare and rise in single-parent and two-worker families mean benefits like childcare vouchers, flexible working and extra holiday can be invaluable. Schemes like these are widely appreciated. Childcare vouchers, particularly, are among the most popular employee benefits. But research (see http://bit.ly/2EFIqdP) also shows that 95% of employers offering them use salary sacrifice, and it’s a similar story with extra holiday. Part-time workers in senior positions, meanwhile, obviously get lower salaries than those doing more hours – and usually, yet fairly, lower bonuses. None of this is noted in the figures published on the government’s website. So, if more women than men choose these benefits or senior part-time roles, the company’s ‘pay gap’ will grow.
...a worsening pay gap through no fault of their own
Stick to it
Of course, businesses have to provide a pension – and it’s illegal to encourage workers to opt out – but they don’t have to offer childcare vouchers or extra holiday. And while they have to consider requests for flexible working, they don’t have to promote it. The danger here is that pay gap reports push businesses to turn their backs on helping working families. That would particularly hit working women; bear in mind sixty per cent of mums with children under four opt for flexible working, according to the Office for National Statistics. Ultimately, though, businesses should carry on regardless. They need to trust that the benefits of a motivated, diverse and loyal workforce are more important than the risk of poor pay gap figures. They should still do their best to explain the figures, though. They should shout about the difference benefits such childcare vouchers make. They can also look to improve the figures – not by scrapping family-friendly benefits and flexible working, but by getting more men onboard. The leadership – and men in particular – need to champion family-friendly policies. Don’t just tell male colleagues that they’re available; encourage them to use them. Promotions and messaging around these benefits also need to keep both men and women in mind. Basically, businesses need to stick to their principles and ramp up efforts to make their workplaces welcoming for all. If they can do that, they’ll be ready for April, but, more importantly they’ll attract and keep the people they need to meet the challenges of the years ahead.