Bridging the gender pay gap: Where now?
Rachel Sharp, September 18, 2018
Many companies have been named and shamed for high gender pay gaps. We explore whether they're now doing enough to narrow their gaps
‘We’re not ready to talk about what we’re doing’, came the email reply from the UK arm of one of the world’s largest firms in response to the opportunity to share its plans to tackle its gender pay gap. Then came the generic six-line formal statement vaguely attributed to a ‘spokesperson’ from another. Then the equally baffling ‘please see our position here’ with a link to another household name’s one-page infographic report. And there were more; some citing the fault of busy financial seasons, some summer holidays, some quite simply ‘not available’.
To say HR magazine was met with endemic caginess when reaching out to organisations for this piece would be putting it mildly, with the old adage ‘silence speaks volumes’ springing to mind.
It was midnight on 4 April when the clock struck on the deadline for the first year of gender pay gap reporting. The regulation requires companies with 250 or more employees to calculate and publish the difference between the wages of men and women in their workforce. It is calculated by taking a snapshot – of 31 March for public sector employers and 5 April for private and voluntary sector employers – of the mean and median pay and bonus gaps, with employers required to publish the figures within 12 months of the snapshot date.
What this means is that the data released up to 4 April 2018 gave a picture of where the companies stood on 5 April 2017. And the 2018/2019 figures that will be released up to 4 April 2019 are already set in stone, with some starting to trickle onto the government website.
So year one’s reporting is done and dusted. And what a year it was. “For many, it was an unholy scramble to get their data together. It’s surprising to see that in this day and age companies don’t have the data, or aren’t aware of what the gender pay gap is or how to calculate it,” says Denise Wilson, chief executive of the Hampton-Alexander Review, the independent review body tasked with increasing senior female representation at FTSE companies. Confusion between the gender pay gap and equal pay compounded the challenge for HR teams explaining to their firms what the regulation – and the numbers – meant.
On deadline day, and in the months of reporting leading up to it, many organisations were publicly named and shamed for high pay gaps. There were plenty of firms to single out, given that 78% of all organisations reported gaps in favour of men.
Among the worst offenders stood budget airline Ryanair with a 71.8% median pay gap in favour of men, and lingerie retailer Boux Avenue (75.7%). Meanwhile, construction and financial services fared particularly badly as sectors.
But, as Wilson points out, this was the first year and “we’ve moved on, we’ve got over the hurdle”. So nearly six months on – with the shock factor having subsided and with firms afforded a bit of breathing space – presumably organisations have got their acts together around what exactly they are going to do to tackle their gaps.
Yet those cagey emails weren’t last year in the midst of the “unholy scramble”. Nor were they in April when press offices were no doubt inundated. This was in recent weeks, in response to HR magazine asking firms not about their current figures, but their plans for future progress.
Organisations not jumping at the chance to put a positive spin on things is “surprising”, says Sue Coe, head of employment at the Equality and Human Rights Commission (EHRC), the organisation tasked with enforcing the regulation. “If employers aren’t clear on what they’re planning to do about their gaps, more and more pointed questions will be asked of them – and not just by us,” she says.
Such “pointed questions” include: are businesses taking this seriously? Have they set action plans? Or are they just quietly hoping the hype dies down?
According to Wanda Wyporska, executive director of The Equality Trust, the latter possibility poses a big risk. “Some organisations will just think they’ll get bad press once a year [as their reports come out] and that they can live with that, so they’ll just carry on doing what they’re doing,” she says.
The problem, agrees chief executive of the Fawcett Society Sam Smethers, is that the gender pay gap regulation includes no rules that employers must take action to close their gaps. “Just reporting the figure isn’t enough – we said all along that an action plan should have been a statutory requirement of the initial regulation, so that employers can be held accountable against their plans,” she laments.
It’s a concern making its way onto the government’s radar. August saw the launch of a new Business, Energy and Industrial Strategy Committee report calling for the regulation to be widened to make it mandatory for firms to publish action plans and narrative accounts on what they are doing to close the gap, on which they must report progress each year. It also called for the threshold for participatory organisations to be lowered from 250 employees to just 50.
Clearly, questions are beginning to hang over the mechanism itself and its capacity to drive change.
Taking it seriously
Karen Gill has a more positive take, however. Comparing today to 20 years ago when she co-founded Everywoman (a membership organisation championing women in business), she says businesses are now much more focused on the issue, thanks to the legislation. “Even 10 years ago, organisations hid the fact they worked with us,” she reports, adding that more firms are now coming to her for help in this area.
Indeed there are encouraging steps being taken by organisations sitting in the ‘taking it seriously’ camp. At the more headline-grabbing end stands PwC’s June announcement to ban all-male shortlists for UK jobs, and the UK tech company that announced in July it was recruiting a chief feminism officer to manage female recruitment and mentor female staff – a role believed to be the first of its kind. Then there was law firm Dentons’ August appointment of a women’s advancement director and a women’s business development role. Other more conventional – but no less encouraging – responses have involved committing to action plans to address the root causes behind the gap.
Accenture, for example, is focusing on the four areas of recruitment, development, progress and retention of women. From a recruitment perspective this involves a dedicated team that ensures the firm is getting a broad range of applicants, while its progression push involves building career development plans. It’s a similar story at construction firm Costain where brand, recruitment and role-modelling form the basis of its three-point plan.
A shared focus for most – and an issue that cropped up in almost all explanations (and excuses) for high gaps back in April – is the need to get more women into senior leadership roles. But this is no ground-breaking revelation. The Hampton-Alexander Review has been driving FTSE boards to reach a 33% female representation target by the end of 2020 since 2016.
“Even though there’s been a huge amount of work on putting more women on boards and in leadership roles, women are still not getting the senior-most opportunities in firms,” says Wilson.
This is something very much on the radar of PwC’s chief people officer Laura Hinton, who points to the introduction of “progression coaches” to support women who want to reach partner level. “We’re also looking at how people are allocated career-defining projects and big clients, so that everyone has fair access to the opportunities that often lead to promotions,” she says.
But too much focus on the senior end of the scale isn’t helpful, says Wyporska. “I’m a bit wary of the whole ‘women in leadership’ narrative,” she says. “Yes we need more women at the top, but many women are in low-paid part-time jobs and many working women are in poverty. Employers looking at tackling their gender pay gaps should focus on bringing the bottom up.”
For gender equality director at Business in the Community (BITC) Chloe Chambraud, to really shift the dial, businesses need to look beyond their female employees. “For too long, employers have just focused on supporting women in the workplace. It’s not just a women at work problem; it’s also a men at home problem,” she says.
It’s a sentiment shared by Alastair Woods, reward and employment partner at PwC, who says shared parental leave (SPL) is the “single-most thing that will make a shift in the workplace” and the “most powerful tool at an organisation’s disposal”.
He recounts his own experience of taking SPL, highlighting the challenges still disproportionately affecting working mothers not fathers.
“I came back to work after having what seemed like a massive holiday, struggling to reset my mindset,” he says. “Then it was a struggle juggling getting my child to nursery and getting to work on time. I think it meant I personally chose not to go for a promotion for another year when I came back.” But despite the challenges, sharing the time off and childcare responsibility rebalances the opportunities for both genders, he asserts.
The challenge for HR as it commits to taking action, warns EY partner in people advisory services Rupal Patel, is that there “is no silver bullet”; the underlying causes – and thereby solutions – differ across industries and organisations.
By Hinton’s own admission, it’s something PwC learnt the hard way. “We’ve been reporting our gender pay gap since 2014, which is frustrating as despite our focus on reporting and accountability, we haven’t closed the gap as quickly as we’d have liked,” she says. “The problem was we were focusing on too many different initiatives for too long – we were doing hundreds of things around the firm and didn’t know what was actually working.”
Step forward a detailed analysis that resulted in stripping initiatives back to basics and a five-point plan. Evidently, conducting a deep-dive analysis of the root of the problem is a crucial first step – which all takes time. For PwC and others taking this seriously, these plans haven’t just materialised over the past six months.
Nonetheless, half a year on from April, some happy stories have emerged. But how will the success of these ongoing actions be measured? The obvious answer would be in the percentage points employers manage to knock off their pay gaps in the years to come. The reality is far less clear cut.
For all the noise around the numbers, few – if any – are pinning a target on narrowing the gender pay gap itself. Which is not to say targets of some sort aren’t critical to driving progress. But firms are placing them on other diversity metrics.
Take PwC. While conceding it might “sound glib” to not have put a target on the pay gap figure, Hinton explains that “there are so many variables that affect the gap, it’s difficult to identify what can make the biggest difference in a sustainable, long-term way”.
“We’ve set targets on the proportion of females in our grade pools instead,” she says. “It shouldn’t be just a quick fix for getting the percentages down. We need to look at the issues – the issue for us is not having enough women in senior positions.”
Put simply, it’s an “input focus rather than an output focus,” says Woods, adding that if organisations get these inputs – such as recruitment, progression and flexible working – right, the “gap will take care of itself”.
EHRC’s Coe agrees with this approach. “There can’t just be a solitary focus on getting from say 25% to 23%. Targets should be placed on the root causes, not on the gender pay gap, as drilling down into the root causes will reduce the gap,” she says. Patel goes so far as to say: “I don’t think it’s a pay issue – pay is just the way it has been measured.”
Which all presents a rather confusing picture. If a firm’s gender pay gap isn’t the right metric for measuring progress on gender equality, would another have proven more effective to regulate around?
“The gender pay gap is not the most important measure,” confirms Sally Austin, HRD at construction firm Costain Group. “It’s better than nothing, but the mechanism is blunt, so it will be interesting to see if we are still focusing on this metric in five years’ time.”
“There are millions of different metrics you could use – this is just one statistic among many that can highlight the issue,” agrees independent statistician Nigel Marriott.
Candida Mottershead, HRD of Accenture UK and Ireland, muses that a “similar level of reporting could have looked at the pyramid of male and female roles up and down organisations”. As just one of many potential metrics, she warns that the gender pay gap “numbers are dangerous in isolation”.
Adding to the sense that the mechanism and regulations as they stand might be far from perfect in driving meaningful change, are the discrepancies unearthed in the data itself since April. In July, the EHRC began writing to firms believed to have supplied “dodgy data”. From what Coe has seen so far, this is largely the product of “genuine misunderstandings”; including the slightly alarming assumption by some that “if they have equal pay, then they must have no gender pay gap”.
Marriott sheds unsettling light on the extent of the issue. His independent analysis of all 10,504 2017 submissions identified multiple ways the data is being misused or misrepresented. He gives the extreme example of one firm that reported a 220% gender pay gap. “It’s impossible to have a gap greater than 100%. Two-hundred and twenty per cent would mean the women were paying the organisation to work there,” he comments.
And this is just one of many glaring errors that have “started falling out of the woodwork”. In total, Marriott estimates that between 10% and 20% of organisations have entered incorrect data. Like Coe, he doesn’t put this down to bad intentions. “It’s a combination of bad guidance from the government, the website not sense-checking errors, and businesses not understanding their data,” he laments. “Not every HR professional will be strong on calculations and if some are just treating it as a tick-box exercise, then little thought will be going into the numbers.”
More nuanced concerns regarding the mechanism are also mounting around how accurate a representation the figures truly give of an organisation’s commitment to diversity and inclusion. Take the fact that almost half of the companies honoured in the 2018 Times Top 50 Employers for Women have gender pay gaps higher than the 18.4% national average.
“My take is that having a high gender pay gap and being a good employer for women aren’t mutually exclusive,” says Costain’s Austin. “We all have different starting points, so it shouldn’t be about the numbers.”
Indeed in some cases, a low gender pay gap can indicate a non-inclusive firm. “If an organisation has one woman and nine men at each level and everyone at the same level is paid the same, then there will be a gap of zero,” points out Tamsin Sridhara, senior director of talent and rewards at Willis Towers Watson. “But the irony of this statistic is that this organisation is definitely not gender-diverse.”
Another example would be where a firm has a female CEO, which could create an impressive-looking gender pay gap in an organisation that nonetheless employs only one woman. Smaller firms in particular are likely to face “volatility” in their numbers over time, Sridhara adds, as one senior female leaving could considerably skew the figures.
So focusing too heavily on driving down the numbers quickly risks triggering anti-inclusive attitudes and behaviours among some firms. These could come in the form of sacking low-paid female workers or outsourcing low-paid work, so that the female mean and median salaries go up and the gap narrows. “Some unscrupulous companies will game the system in this way so their figures get better,” warns Marriott.
“It sounds extreme,” admits Sridhara. “But if people are chasing a number, they might do things like replace all the women at the bottom with men, which will reduce their gap but will also reduce their overall representation of women in the workplace. Businesses need to be doing the right things for the right reasons.”
And the right things might end up having an unintended impact on the gender pay gap figures, says Hinton. “There’s a risk our gap could get worse before it gets better as when we bring more women into director grades, they will be grouped at the bottom of the grade and it will take time to wash through,” she says.
It’s a similar story for firms looking to increase the overall representation of women in their workforce, argues EY’s Patel. “Encouraging more women into a specific sector or workforce starts at the junior end where they’re paid less – such as at graduate level – and then they get trained up the ranks,” she explains. “So many sectors and organisations may see their gaps increase in the short term, even though they are taking the right steps in terms of opportunities for women.”
The right regulation?
Which begs the question of whether the mechanism and regulation itself is ripe for change over the coming months. Off the back of 1,456 organisations failing to report on time, as well as so-called “dodgy data” being filed, have come increasingly audible calls for stricter sanctions, more obligations for firms around taking action, and for the regulations to cover more of the workforce.
But there are practicalities to consider here. “Of course the more employers required to report the better, but I think there’ll be issues around validity of data if the threshold is too low,” warns Chambraud. “For a firm with just 50 employees, it may not give a true representation.”
Resourcing, time and costs may pose a burden for smaller enterprises, says Carolanne Minashi, global head of diversity and inclusion at UBS. What she is hopeful for is greater “clarification around part-time workers” where women tend to dominate. This is something The Fawcett Society is calling for.
But change may take a while, Minashi laments: “We’re all waiting for the government to say if they’ll change anything this year, but I don’t think there’s much desire from them to as lots of work has gone into this… and it does at least give a set structure where every company calculates and reports the same, so can be compared and contrasted.”
For many, the point is less about the perfect mechanism and more about making a regulatory statement that has businesses – and business leaders – sitting up.
“Our leaders do like a data point and like to see how we fare against other firms, so it’s given us more of a focus among the rest of the business,” says Accenture’s Mottershead. “Historically, diversity was seen as something that just sits in a pocket of HR, but it’s now being recognised as a business-wide issue,”agrees Austin.
“Very few firms understood what the gender pay gap was before, and even fewer were doing anything about it,” says Wilson in defence of the power of reporting. “There was no compelling case to do anything as it wasn’t public data, so if companies wanted to just pop the issue in a drawer and forget about it, they were quite at liberty to do so.”
Which raises the question of whether we’re now on the cusp of a climate of intensified reporting on other diversity metrics. Gender is just one small facet of diversity after all.
Coe certainly thinks so. “Pay gap reporting and the response to it has been a real game-changer where the power of transparency has been demonstrated,” she enthuses. “The momentum has started with gender, and then I think this will start the ball rolling quite quickly into other areas such as ethnicity,” adds Woods.
“Women from BAME backgrounds face more issues in the workplace than white women, and so the conversation needs to move onto this as well,” says Chambraud, explaining that gender and ethnicity data should in her view be analysed together.
In fact there was an Ethnicity Pay Gap Bill being read in the House of Lords in 2016 that, points out Wyporska, “got washed up in the snap election”, with calls now coming from all sides for it to be picked up again. Additionally, the 2017 McGregor-Smith Review recommended companies report on their ethnicity pay gaps; the EHRC is in the midst of finalising its research and recommendations on collecting ethnicity and disability data in the workplace; and BITC is carrying out a government review into how employers are improving ethnic minority progression in the workplace, which includes whether they are reporting their ethnicity pay gap.
“Some organisations will be proactive and do it off their own backs,” says Sridhara. “The government will wait for companies to do it voluntarily and, if they don’t, it will up the regulation to ensure they do.”
But there are reservations. “How the reporting is managed will be important – if it turns into a punitive approach, that’s going to be difficult as the gender pay gap has shown us we can’t judge every situation at every firm in the same way,” says Kathryn Austin, chief people and marketing director at Pizza Hut.
As the people leader at one of the few firms to have set a precedent on BAME gap reporting, PwC’s Hinton admits a more intense wave of reporting will bring challenges. “While it’s good to look through lots of lenses such as LGBT and disability, it might become quite onerous,” she says, explaining that while employees who’ve joined PwC in recent years have supplied data, it will take time to gather this for existing colleagues.
Current HR systems just aren’t up to the task, agrees UBS’ Minashi. “For all UK firms to reliably report even their BAME gaps, they’d need a new HR system as this isn’t something institutionally done in most companies.” Much of these measures are done on a self-disclosure basis too, she adds.
“These things have to be done on a step-by-step basis,” concedes Wilson. “We can’t impose too much change all at once.”
And so to what we’re likely to see over the next six months as organisations begin filing their 2018/19 figures. Can we expect any improvement on this year?
Chiming with the above cautionary notes around the fallibility of the mechanism, Minashi says she “wouldn’t expect anyone to have radically different figures this year”. She points to the fact that most companies left the reporting late in the day, with more than 1,000 firms publishing on deadline day itself, coupled with the data being a year out of date when it lands.
“Organisations were nervous to report and it was something of a who’s going to blink first scenario,” she explains. “Especially for those reporting near the deadline of 4 April, I’d be very surprised if we see a big move as there just hasn’t been the time for them to put in steps for change before the next data capture point happened on 5 April.”
Again a sense of realism is necessary around the fact that this isn’t going to be a quick fix. “You can’t expect thousands of years of business structure to change overnight,” says Everywoman’s Gill. “It’s a complex issue, so no one – not even the government – is anticipating a big drop this year.”
A long-term agenda then. But looking further ahead, can firms ever be realistically expected to achieve zero gender pay gaps? “Reaching zero is the goal, so it can be done,” says Chambraud. “It may take another 100 years, but if the right resources are in place, this will move forwards.”
Costain’s Austin is sceptical, however. “It will never be zero at Costain in our lifetime. I’ve played around with the figures and if I take my CEO and replace him with a woman, it makes about a 1% difference. I calculated if I changed the executive board to all women, it still only takes it down to about 18%. So clearly to get it down below 10% for us is going to take years,” she explains. Employers aren’t fully in control of the outcome, adds Coe who says some of it is “down to wider societal issues”.
But more positively, the current climate created by wider society will potentially have the most impact on driving this agenda. Change doesn’t solely come about through government policies or business commitments after all.
The momentum, Austin says, will be driven by what she sees as a feminist uprising among female employees. “We’re seeing a rise up among the female workforce becoming stout feminists and driving this change,” she says. “It’s only when the people who are exempt from something fight for it that real change happens.”
What this means, Wyporska asserts, is rumblings of women boycotting firms with high gender pay gaps or showing few signs of progress here.
A telling finding from BITC is that more than half of female employees would favour the company with the smallest pay gap, or that is most proactive in closing it, when choosing between two employers.
“The data is giving women choices about where they work, which is shifting the issue from a moral concern to a hygiene concern for businesses,” says Wyporska.
“This is very powerful as if young prospective employees look at the gap when choosing an employer, this will affect the ability of firms to attract talent.”
The pressures don’t end there. The ethical consumer has the onus to decide where to shop. And, says group director of responsible business and inclusion at Lloyds Banking Group Fiona Cannon, investors in firms are adding pressure attheir end.
“It’s all part of driving a broader debate where it will become more difficult for organisations to neglect their gender pay gap, so that hopefully it won’t just become another talking shop, but we will see long-term change,” says Cannon.
And herein lies the crux of the matter. For all the immediacy of the snapshot data and subsequent media fallout, the gender pay gap is a long-term issue. “The attitude now is that it doesn’t matter what the starting point of the numbers was this year, it’s about sewing the seeds in the right places to accelerate the pace of change going forwards,” says PwC’s Woods.
“The conversation this April was ‘these are the numbers, this is why and this is what we’ll do’,” agrees Sridhara. “Next April, the conversation should be on the diversity strategy. It should be ‘here is what we are doing to support diversity in our organisation and this is our progress’.”
“‘Oh, and by the way, this is our gender pay gap number’.”