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Has regulation helped close the gender pay gap?

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Gender pay gap reporting has been with us since 2017 - the UK being at the forefront of legislation in this area.

Since then, reporting requirements have become more common across jurisdictions, alongside the growth in social expectations of businesses regarding equality in the aftermath of #MeToo.

 

Risk and reward

The government’s strategy was to help employers address gender pay gap issues through online guidance and toolkits, with a readily accessible website allowing the public to search and compare the data reported by employers under the gender pay gap regulations.

With greater transparency came league tables, benchmarking, naming and shaming campaigns and resulting media publicity. A December 2021 YouGov poll showed that, since 2018, understanding of the gender pay gap increased, with media publicity following annual gender pay gap reporting likely to have been instrumental in this respect.


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Research from the Equality and Human Rights Commission previously reported that nearly two-thirds of women would take an organisation’s gender pay gap into consideration when applying for jobs.

Recent analysis from the Centre for Economic Performance also suggests that women are sensitive to gender pay gaps, and the reasons for those gaps, when deciding on future employers.

Yet one must remember that gender pay gaps can exist despite the existence of pay equality.

 

Changes on the horizon?

While there are signs that greater transparency introduced by the regulations has had an effect, is there evidence that the regulations have helped close the gender pay gap? 

It is clear that the gap has been slowly reducing since the regulations were implemented.

Based on ONS data, the gender pay gap among full-time employees dropped from 9.1% in 2017 to 7.9% in 2021, and from 18.4% to 15.4% for all employees over the same period.

This continues the momentum built up over the last decade when the gap fell by approximately a quarter among both full-time employees and all employees. Despite this the UK gender pay gap remains one of the highest in Europe.

As a result, a government review of the effectiveness of the regulations (expected to report this year) is keenly awaited and may suggest that the legislation is strengthened with the intention of building on and accelerating progress.

Meanwhile, a draft EU directive will, if implemented, introduce significant new pay transparency and enforcement mechanisms across Europe.

If agreed, the directive would offer enhanced access to pay and promotion information, as well as necessitating action plans to close gender pay gaps in certain circumstances. Rather than being at the vanguard of reporting, the UK may come under EU pressure to “level-up” its regulations (as part of Brexit trade agreements) to keep pace.

Irrespective of whether or how the UK government acts in response to the directive, increasing pay transparency is here to stay.

Employers (particularly those with a pan-European presence) are making progress but the next step will be to consider EU developments in developing future pay strategies.


Sally Isaacs is partner at Eversheds Sutherland