Prime minister David Cameron said that he wanted to "create the pressure we need for change" to help drive up female workers’ wages, and to close the pay gap between the genders "within a generation".
He also said that the new living wage, introduced in the budget, “will primarily help women, who tend to be in lower paid jobs.”
"It will help close the gender pay gap,” he said. “But we need to go further, and that's why introducing gender pay audits is so important."
The announcement builds on the last government’s ‘Think, Act, Report’ scheme, which encourages employers to discuss what they are doing to promote gender equality around business issues such as pay and recruitment.
It comes at the same time as new figures show that the FTSE 100 has met its target, set by Lord Davies in 2011, of ensuring 25% of all board members across the index are women.
Clare Lyonette, from the University of Warwick’s Institute for Employment Research, said that while the news is welcome, there is still a long way to go before equality is reached. “The Equality and Human Rights Commission has been calling for these changes for years,” she said.
“There are also additional issues to address to ensure that women do not fall behind men in the workplace, such as the quality of part-time jobs and the full-time/part-time pay gap; the prohibitive costs of childcare; and any residual gender discrimination within organisations, whereby women are seen to be less committed to work than men."
“However," she added, "this is certainly a step in the right direction.”
CBI deputy director general Katja Hall agreed there were wider issues, such as occupational stereotypes, that also needed tackling, and said that careful thought would need to be given to how this legislation is rolled out.
She said: “Addressing the gender pay gap is the right priority – and we should set a target for reducing it. While we believe publishing pay gap data could be misleading, we will work with the Government to ensure that rules on what is published are flexible enough to be relevant to each company.
"To see real progress, however, we need to challenge occupational stereotypes by encouraging more women into male dominated industries and investing in careers advice.”
CMI chief executive Ann Francke welcomed the news but urged companies to do more than report on average pay rates. "Given that the gender pay gap is widest at the top, it is vital that companies track pay across different job levels," she added.
Heather Jackson, founder and chair of an Inspirational Journey, agreed that execution is key. She told HR magazine: “The intention is great, but it’s how we execute it that will decide the outcome.”
She added: “This is not about alienating men. It’s about doing the right thing.”
Acting Labour leader Harriet Harman first discussed powers for the government to force companies to reveal their gender pay gap, but the coalition opted for a voluntary approach.
When only five companies volunatarily published their gender pay gap (Genesis, Tesco, PwC, AstraZeneca and Friends Life), the Liberal Democrats argued for mandatory reporting. The Conservatives included in their manifesto a promise to enforce the policy for companies with more than 250 workers.