Listen to this article
This is an experimental feature. Give us your feedback. Thank you for your feedback.
What do you think?
By April next year, for the first time, all UK companies and public sector organisations employing 250 people or more must report the gap between what they pay their female and male staff.
Nationally, this gap, measured by the median for full-time workers, was 9.1 per cent in the year to April 2017.
The reporting requirements have prompted grumbling from business, particularly smaller companies, which have complained of their being complex and onerous. Employers must publish data on the difference between mean and median salaries, wages and bonuses, as well as the gap at different pay scales.
But complaints about the rigours of the reporting process miss the dangers of ignoring the gender pay gap, or of treating the new requirements as a tick-box exercise rather than an opportunity to engage fully with the question.
The deadline for the public sector is March 30 and for the private sector April 4. By mid November, only 236 companies had reported of the estimated 9,000 that will need to.
One suspicion is that, in digging up the data, companies have discovered that they may be inadvertently breaking the law which has — since the passage of the Equal Pay Act in 1970 — required that employers pay men and women equally for doing the same job.
Ed Stacey, head of legal services at consultants PwC, for example, says companies that have simply calculated the key reporting metrics would not be in a position to understand whether they are inadvertently paying one gender less for doing the same role. This is because the metrics provide a snapshot of gender pay differences rather than an analysis of whether people doing the same role are paid the same.
He suggests, therefore, that it is likely that many companies will have carried out additional analysis as a result of the reporting requirements and some may have uncovered potential equal pay concerns. Mr Stacey also points out that, while there are no financial sanctions for failure to comply, failure to report will constitute an unlawful act.
The Equality and Human Rights Commission has the power to take enforcement action accordingly. “This could include it taking steps such as investigating the non-compliant employer, issuing an unlawful act notice or requiring the production of an action plan,” Mr Stacey says.
As well as legal risks, not addressing the gender gap appropriately carries significant commercial and social dangers. These include poor morale, losing talented employees and bad publicity, as the BBC found to its cost in July, after the disclosure of the salaries of its top presenters. These revealed that women accounted for just a third of the top earners and caused a furore.
It is not just in attracting and retaining staff that the dangers of a large gender pay gap lie. For businesses dealing directly with customers, diverse teams have become an increasingly important presentational matter.
Many clients would not be impressed, says Emma Codd, managing partner for talent at consultants Deloitte, if companies like hers sent in advisory teams that did not reflect modern demands for greater diversity.
A survey published in October of more than 1,000 senior professionals and business decision makers across the UK showed that 84 per cent of respondents believed the gender pay gap would damage the reputation of organisations.
The research, from public relations company Golin, showed that 77 per cent said organisations were likely to lose staff over the question; 73 per cent believed the worst offenders would find it harder to recruit and 76.5 per cent said these should be “named and shamed” for their gender pay gap.
Just before the requirements came into force, Justine Greening, the UK education secretary and minister for women and equalities, said companies failing to reduce the gaps would face “a real reputational risk” and would be at a competitive disadvantage.
The government hopes — although has not insisted — that, alongside reporting their gender pay gaps, companies will publish their plans of action as to how they aim to address them.
Financial services specialist Virgin Money is an example the government would like others to follow. Its median gender pay gap of 38 per cent is large, even by the standards of its industry which — on the basis of the companies that have reported so far — has a median gap of 31 per cent, the highest of any sector. But Virgin Money has been clear about its efforts to address the problem.
The extent of its pay gap is “not a number that we feel proud of”, says Matt Elliott, the company’s people director. “The useful thing was that it drove us into [asking]: ‘Why is it?’” Virgin Money was one of the first companies to make public its action plan to address the gap.
Mr Stacey notes that if the regulations had compelled plans to be published, there is little doubt that more would have been. “In this first year of reporting, employers may be reluctant to commit to a specific action plan as, for many, this will be the first time they have considered their gender pay profile,” he says.
“However, as annual reporting is required, it is likely that companies will need to start carrying out remedial action in order to address their pay gaps,” he adds, “and will develop action plans accordingly”.
Sam Smethers, chief executive of the Fawcett Society, the UK charity campaigning for gender equality and women’s rights, says pay gap reporting is merely a first step. “Those who make the greatest progress will develop an evidence-based action plan and start to make meaningful changes — from flexible working by default to supporting fathers in the workplace,” she says.