It’s estimated that reducing the gender pay gap could add £150 billion to our economy by 2025, through increasing the number of women in work. It’s a figure – that as a nation – we wouldn’t ignore if it were to be added to our National Health Service or education system. So, why in the world of work are businesses still refusing to close the pay gap which alienates women and has the potential to destroy businesses?
New legislation which comes into effect from April 2017, will require businesses with more than 250 employees to report data relating to pay of both female and male employees. Yet, while the date is just over six months away, unless the gap is addressed in advance of the date, it could leave businesses on an unsure footing further down the line.
Considerable movements were made towards closing the gap back in 1970, with the Equal Pay Act and the Equality Act in 2010; it’s estimated by Deloitte that the gender pay gap still won’t be closed until 2069. With the gap currently standing at 19.4%.
Throughout our work we meet several organisations, and I don’t believe employers have a problem with meeting the new regulations; the time and resources required are easy targets to meet. The real issue lies with addressing any pay gap which is found – which the government are hoping the mandatory reporting encourages.
Our most recent research found that only 44% of organisations currently measure the state of pay within their business. 77% of those that do measure pay, do not report on their findings at all and only 1% publish the data externally – proving there’s clearly a long way to go until figures are published for all to see. While these figures will rise when the new legislation comes into play, ignoring the figures now will impact your business in the long term.
It’s a confusing time for businesses who are perhaps unsure on how to begin dissecting their pay data or address any pay gaps. However, one thing is for sure; gender pay isn’t an issue you can sweep under the carpet. Pay is one of the most emotive subjects in the workplace, so getting it right is key to your businesses success.
What employers should do
If your business employs more than 250 members of staff, then you are required to report on baseline pay gap figures in April 2017 and then again in April 2018. The figures are then published at the latter date on your businesses website so that they are accessible to employees and the public for three years, as well as being submitted to the government through a dedicated portal.
Pay gap figures should include bonuses and car allowances. Bonuses can be a breeding ground for pay inequalities as they are often individually determined, thus increasing the number of gaps which occur. Pay and bonus figures are to be analysed and submitted separately.
Most importantly, any gaps that are found, are required to be investigated to see the main driver behind the figures. Businesses are then required to act to close the gap.
Put pay on the agenda
Don’t be put off by the fact that data won’t be published until April 2018 – the time to act is now. Depending on when you review employees pay, your 2016 figures may influence your baseline gap when measured in 2017. Those who review pay between May and December may find this to be the case, proving the 2018 deadline could be affected.
The government has stated, “If gender pay gap reporting is to have any impact, it must help employers understand why pay gaps exist and lead to action to address these problems. It must be the beginning of a process rather than the culmination of a tick box exercise.”
Businesses need to be fully invested in closing the gap rather than simply paying lip service to the legislation. A detailed audit will fully identify genuine pay discrimination and help to explain pay gaps which currently exist within the business.
Develop a clear process, like the below, to help you address gaps:
- Decide the scope of the review and identify the data required
- Identify where men and women are doing equal work, like work, work rated as equivalent or equal value
- Collect pay data to identify gaps
- Establish the cause of pay gaps and decide whether they are free from discrimination
- If pay gaps aren’t free from discrimination an equal pay action plan should be developed, if there are no gaps, this should be reviewed and monitored
Avoid business suicide
Whatever you do, don’t put the pay gap to the back of your businesses mind. It should be at the forefront right now or you could risk committing business suicide. Pay is so emotive that it has the potential to lead to bad feeling both internally and externally if you don’t handle gender pay reporting in the right way. Leading to a PR disaster and employees in uproar if you aren’t careful.
There have been several high-profile cases where big pay-outs were made by businesses and public image destroyed. Birmingham City Council were found to be liable for a £757 million settlement from equal pay claims from women who missed out on bonuses. A big hit to both finances and image.
Putting external views aside, if you refuse to address the gap you could face a wave of unrest among your employees. Identify any gaps and work hard to reduce them and the impact on employee engagement and retention is unmeasurable. Measuring the gender pay gap enables you to empower employees and prove to them they are valued and respected in their working environment. Thus, increasing their loyalty with you and improving productivity.
Clearly, the legislation is a step in the right direction in helping to close the gender pay gap once and for all. However, with no mandatory ruling in place that gaps are addressed, it seems the government are hoping the name and shame route will force businesses into reducing gaps and bring pay equality to their firms.