The gender pay gap highlights broader inequalities at play

The UK is one of the few countries to require employers with over 250 employees to disclose their gender pay gap (GPG) data. New regulations came into force in April 2017 and cover any employer with 250 or more employees in England, Wales and Scotland (but not Northern Ireland) on 5 April (or 31 March for public sector employers). Employers are required to publish six types of data around the snapshot date, while data on the bonus gap cover the whole year. The House of Commons Library has published a useful briefing, including the assessment of the Commission’s enforcement powers in relation to gender pay gap reporting.

Gender pay gap reporting is the start of a long conversation about gender inequality in the workplace as no other reporting so far has shone a spotlight as fiercely on organisations nor sparked as much public debate on organisational practices. According to the global communications agency Golin, the gender pay gap was the biggest business story in the UK in 2018, rivalled only by the royal wedding. The media storm showed that the gender pay gap could be reputation-enhancing or have a shaming effect: 84% of business professionals that participated in Golin’s gender pay gap research acknowledged the reputational damage of “naming and shaming” on this issue. 77% believed that organisations would lose staff over a sizeable gap and 73% that the worst offenders would find it harder to recruit.

GPG reporting represents a big first step, as illustrated by major advertising firm, JWT, whose creative director said the gender pay gap was a “rocket in the arse” to accelerate the diversification of its staff base and lose its “boys club” reputation. This is the premise of the reporting requirement. Imposing pay transparency on large organisations serves as a direct challenge to change their cultures and prioritise gender equality.

Organisations are now expected to show improved figures. Companies can no longer remain anonymous, providing a good incentive for employers to act. But early indications are not good: 1340 organisations (around 10%) have already submitted their figures ahead of the 5th April deadline. Of these, around 40% have reported a wider gap. An analysis based on these data would be premature but the figure is not entirely surprising. Namely, the nature of the gender pay gap means that it is possible for employers to widen the gap even if they support gender equality. If the organisation’s long-term approach is to recruit more female graduates to lower-paid junior roles, this would increase the pay gap in the short-term. Conversely, the GPG can be narrowed by outsourcing the lowest-paid jobs or paying both women and men poorly – definitely not a strategy to support.   

We can already see that in Kwik Fit and Virgin Atlantic, for example, the gap has widened. Drawing conclusions about the driving factors this year would be premature but Golin’s research suggests that companies are losing senior (best paid) women over internal pay issues. However, a bigger concern may be not tackling other driving factors such as the culture of presenteeism, constant availability, and long working hours, in addition to bias in recruitment and progression, limited returnship opportunities, occupational segregation, and gendered care responsibilities, including limited offer of enhanced shared parental leave.

More than ever, narrative reports will be instrumental, particularly for organisations reporting a wider GPG.

Closing the gap is not plain sailing. It reflects broader inequalities at play in society, such as gendered working patterns, women’s shorter working hours and educational choices, and thus does not happen in a single reporting cycle. Also, closing the gender pay gap within organisations will not eliminate the national pay gap altogether. But employers are key to ensuring that their organisational practices and workplace culture, recruitment and selection, progression, organisation of work and pay structure support both men and women.

GPG reporting offers other useful lessons. One is an obvious confusion between the gender pay gap and pay equity. While both measure the disparity in pay women receive in the workplace, they are different. Equal pay means that men and women in the same employment performing equal work must receive equal pay, as per the Equality Act 2010. GPG measures the difference in the average hourly wage of all men and women across a workforce, expressed as a percentage of males’ earnings; this amounts to 17.9% in the UK. GPG widens when women do more of the less well-paid jobs within an organisation than men. It is useful in measuring pay equality due to its simple calculation, but it does not measure the pay difference between men and women at the same pay grade, doing the same job, with the same working pattern. What it does offer is a measure of the differences in men and women's working patterns: different occupations, part-time roles being predominantly female, and low representation of women in senior roles.

Last year, more than 200 organisations had to change their data, and over 900 reported an improbable zero pay gap by mean and median. This suggests that many organisations are struggling with gender pay gap reporting and there’s an estimate that more than 9% of reports may be wrong.

This may be a call and an opportunity for critical Human Resource Management programmes to invest in more sophisticated data analytics and statistical training to improve the HR practitioners’ understanding and reporting of social science data.