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The Gender Pay Gap and Your Business

How are you going to explain your 18% gender pay gap?

Following the publication of last week’s ACAS Guidance on Gender Pay Gap reporting HR teams across the land are focused on producing their first gender pay gap reports.   Whilst it is easy to get bogged down in the detailed reporting requirements, understanding and explaining the headline figures are key.

We don’t have a gender pay gap, do we?

The Equal Pay Act came into force nearly 50 years ago.   However, on average, the hourly pay of female employees is 18% lower than men’s according to the IFS.  It follows that the typical employer should expect to have an 18% gap, although the gap is likely to be larger for businesses with large part-time populations, or for those with few women in senior positions.   Come next April you are going to have to put your name to the explanation.

But this is just more red tape! Do we really have to?

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 applies to private and voluntary employers with 250 or more employees.  Employers will have to publish a report showing the pay data on 5 April 2017.

This aims to show median and average pay data and bonus data.  It also seeks to separate data by quartile.

The figures must be accompanied by a written statement of accuracy, signed by a director, and be published on the employer's website.

Okay, we’ve a problem. What now?

Your numbers and any explanation that you give could be very dangerous:

  • It is likely that gender pay figures will be seized upon by claimant lawyers.  Most obviously they may suggest (rightly or wrongly) that an equal pay claim may exist and will almost certainly form the basis for further group claims in this area.
  • They may also be used as ammunition by those who can show that they have been less favourably treated but need to prove that the reason for their treatment is tainted by sex.  Lawyers will argue that the existence of significant pay disparity create a prima facie case of discrimination that reverses the burden proof.
  • They also create internal disaffection and feelings of inequality with the demotivating effects that those have on high performers.

We are generally recommending that employers explain the reasons for any differences.  This will require a much more detailed review of the numbers behind the scenes in an attempt to control or explain disparities which exist in particular roles, at particular career levels and any difference in part time/full time work.   This is also an opportunity to put a spin on things by explaining the measures that you have taken and will take to address any gap.

Some employers may wish to go further and disclose on a voluntary basis more granular data to explain and justify apparent disparities in the headline figures.

Whilst not a panacea in itself, this may reassure employees who feel that their concerns are being taken on board meaning they are less likely to resort to lawyers. There is a tightrope to be walked here as too much information may fuel further claims or give individuals something to attack the company with if they bring a claim.

Explaining the numbers

A closer look at the IFS numbers reveals a more nuanced picture that than the headline number may suggest and this may help understand your gap.  According to the IFS:

  • the gap is “relatively small or non-existent” when people start work
  • the gap widens gradually but significantly from the late 20s to early 30s
  • taking time out of paid work is associated with lower wages
  • working low hours is associated with slower hourly wage growth

It seems that men’s wages (particularly for the higher earners) grow rapidly whilst women’s wages plateau. This coincides with the arrival of children.  We have been strong advocates of shared parental leave and encouraging more men to take on child care responsibilities is, we believe, key to normalising career breaks and part time working in many organisations.

It also seems that occupations where women are underrepresented typically produce higher pay gaps.  Here it is more difficult, but employers may look at taking positive action to increase female recruitment, to understand and address the reasons for attrition of female talent.

There is also evidence that suggests that a large part of the disparity has to do with part time work.  Apparently, women who work part time earn 32% less per hour than those working full time.  Employers may wish to analyse their part time/full time data to understand the reasons for this and to ensure that they properly reward the contribution that part time workers make.

What should I should now?

Being ahead of the game, understanding the data, formulating a message and developing practical measures are undoubtedly the key ways in which employers can prepare themselves.  Whilst employers have until April 2018 to publish their reports there is substantial work to do and real legal risk for those who are unprepared.

There lies ahead a change in the dynamic of employee relations taking place in an already rapidly changing world.