The issue of the gender pay gap remains high on the agenda for HR and the wider organisation. Littler’s recent Executive Employer Survey found that gender pay equity was the most concerning HR issue among employers, with 37% saying that it has caused a ‘high or very high’ level of concern in the workplace.
So what have we learnt from last time?
The Financial Times reported that 78% of employers had a gap that favoured men, and the median gap in median hourly pay was 9.7%. The size of pay gaps varied significantly by sector, with the largest gaps in the construction, finance and insurance sectors, and the smallest in the health, accommodation and food sectors.
The easy availability of this data has led to gender pay gaps being widely reported in the press. Many employers’ gender pay gaps have been brought into the spotlight and scrutinised, with trade journals regularly running sector comparisons.
What practical steps can employers take?
Given the risk of adverse publicity and in the interests of ensuring equality in the workplace, there are a number of proactive steps employers can take to reduce their gender pay gap and minimise associated risks. These include:
- Voluntary narratives – while not compulsory, we recommend that employers prepare a narrative including an explanation for any gap and setting out what action they plan to address these disparities. It will often be worth providing more detailed information and calculations than legally required to ensure a true picture is given.
- Producing an action plan – some employers might want to consider publishing an action plan setting out the steps they propose to take (both long term and short term) to narrow their gender pay gap. Employers might want to include steps that have been taken since their last report and the impact these have had (or are expected to have in the future).
- Female-focused initiatives – a number of employers, particularly in those industries where the gender pay gap is largest, have launched initiatives aimed at recruiting, promoting and retaining women throughout the business.
- Support for working parents and those taking career breaks – given recent research indicating that parenthood affects the gender pay gap, employers might consider reviewing the arrangements they have in place that may benefit working parents, for example maternity/Shared Parental Leave entitlements and flexible working.
- Dummy calculations – fast-growing employers (that do not meet the reporting threshold at the moment) might find it helpful to conduct dummy calculations while they are not yet subject to the reporting obligations. This may be a useful indicator of emerging trends so that steps can be taken to resolve them before they are required to report.
What does the future look like?
The deadline for the second round of reporting for private companies is 4 April 2019 and must be based on the position as at 5 April 2018. It’s too late to influence the actual figures for this year’s report, so the challenge for employers is how to present them with a narrative explaining the context for any gap, as well as looking forwards to narrowing any gap.
A common mistake in the media and elsewhere is the conflation of gender pay gaps and equal pay. While gender pay deals with average calculations across the business, equal pay refers to the right of women to receive 'equal pay for equal work' and can result in high-value claims by hundreds or sometimes thousands of claimants (as we have seen in several supermarket chains recently). An increased focus on the gender pay gap may raise subsequent questions about whether men and women doing work of equal value are being paid an equal amount.
As part of a wider gender equality analysis, some employers have conducted equal pay audits to pre-empt any potential claims and minimise risks in the future. If employers decide to conduct equal pay audits consideration should be given to privilege issues so that any analysis is not disclosable in the event of future litigation.
The government has rejected calls to extend the reporting obligations to smaller employers. However, there are ongoing consultations on introducing ethnicity and disability pay reporting, although neither is expected to come into force imminently.
Raoul Parekh is a partner and Deborah Margolis is an associate at GQ|Littler