Time is ticking – and the deadline to report your company’s average gender pay gap (GPG) will soon be here. To date only a handful of companies have released their figures. The majority have yet to make a move. Hardly surprising, for many – not least those in the 250 to 499 employee category – simply collating the data and processing it is a tough enough prospect.
Even when that’s completed there is still the task of analysing the data and understanding the impact this will have on employees and all your other stakeholders when you do publish. Most companies will have a GPG: even progressive employers who thought they had diversity and pay issues in hand. Consequently an accompanying ‘narrative’ is every bit as vital as the figures themselves. Perhaps more so. The causes of gender pay inequality are complex, but you need to be ready to face up to the challenges reporting will bring.
So here are six checks you can make right now to help you understand what might be behind the pay gap in your organisation.
1. FTE v. non-FTE
It’s essential you strip out part-time workers. Why? They are almost always paid less than full-time employees - and more women work part-time than men (in 2016 the split nationally was 41 per cent of women working part time compared to just 12 per cent of men). National statistics suggest that the gender pay gap for full-time employees was 9.4 per cent in 2016. But for all employees - both full and part-time - this climbs dramatically to 18.1 per cent. Nationally, part-time women tend to work in lower paid occupations. So right away it’s essential you look at hourly pay rates and employee numbers for part-time and full-time employees - and address the impact of why part-time pay is lower in your organisation.
2. Strip out the bonus
The pay gap is bigger when examining bonus payments separately. In addition, it’s worth looking into the bonus pay gap on a full time equivalent basis. When calculating the mean and median bonus gap, the regulations do not allow for making full-time or full-year equivalent comparisons. So when employees have bonuses which are pro-rated for part-time or maternity leave - and these will be disproportionately female - this could have a significant impact on the bonus gap - and you need to take account of this.
3. The impact of salary sacrifice
When it comes to pay gap reporting, an employee’s salary sacrifice arrangements are excluded. The trend is for more women than men to take up salary sacrifice benefits such as childcare vouchers or additional leave. This could well result in an artificially lower rate of pay for those who opt to use salary sacrifice compared to those who do not. Given the gender implications, you should consider doing two sets of figures - one using pre-salary sacrifice pay and one post-salary sacrifice.
4. Combine analysis of seniority and tenure
For various reasons the representation of women falls off at more senior levels. This can be seen to some extent in workforce proportions by pay quartile reporting requirement. But it’s worth including tenure or length of service along with seniority in your analysis. Longer tenure usually equates to higher pay rates, so it is useful to combine tenure and job level, since senior men may be paid higher in a grade because they have longer tenure. This is particularly true in sectors where pay progression is based on years of service.
5. Age – the maternity penalty
The Office for National Statistics produces statistics on the GPG by age for full-time and non full-time staff. You should consider doing the same for your organisation. What you’ll find is a ‘maternity penalty’ - and that the pay gap increases for women from thirty onwards - when they have children and tend to be the principal carer. When considering actions to address the GPG it is worth focusing on what can be done to tackle this ‘maternity penalty’.
6. Examine your pay practice in general
There are many ways in which general pay practice can have a direct impact on GPG reporting. You need to take a long hard look at all your pay policies and especially eligibility. Look too the measures that make up your bonus schemes and how these impact men and women. If measures are based on hours worked, directly or indirectly, these can penalise women. Finally, look at how pay increases are applied for out of cycle increases, promotions, and newly hired staff. Any of these areas could hide potential issues or even direct causes of gender pay gap inequality in your organisation.
The transparency being forced upon organisations by the gender pay gap reporting is a necessary and hopefully welcome precursor to change. There is no doubt that right now the playing field in this area is not level. Not making the best use of women in our economy is a huge waste of education, creativity and talent – at a time when many organisations are struggling to find and retain the best people.
Nobody said that GPG reporting would be easy to achieve, but with the right resources it can be done. By taking some of the steps outlined above you can provide your organisation with the understanding needed to develop a narrative for employees and other stakeholders. But equally it will give your company the deeper insights required to make important changes to the way you handle gender and pay, and that has the potential to have a hugely positive impact on your business.
Ruth Thomas is a senior consultant at Curo Compensation
