As part of the Commission's drive to increase gender equality in the workplace, this step aims to encourage businesses to adopt voluntary measures to analyse and make public their gender pay gaps.
The Commission has released proposals outlining the voluntary measures organisations with more than 250 employees can use to publish information on pay differentials between men and women.
The proposals come as a result of a consultation process led by the Commission and involving representatives from the CBI, TUC and other stakeholders including business, the voluntary sector, trades unions and equal pay experts. The Government has requested the Commission to work with these key stakeholders to develop metrics for reporting and publicly sharing this information on a voluntary basis.
Forty years after the Equal Pay Act came into force women are still on average paid 20.2% less per hour than men. The gap is wider in the private sector (25.6%) than in the public (18.8%).
But evidence gathered for the Commission shows fewer private sector employers are taking action to close the gender pay gap. The Commission believes increasing transparency is crucial to addressing the difference between what women and men earn
Transparency does not mean an individual has the automatic right to know what another individual earns and would not mean that employers would have to publish details of individual employees' salaries.
As a result of the consultation, the Commission is proposing a menu of voluntary measures to report on pay by gender, which organisations with more than 250 employees can choose from. These measures include:
- The single figure difference between the median hourly earnings of men and women
- The difference between the average basic pay and total average earnings of men and women by grade and job type.
- The difference between men and women's average starting salaries
The Commission is also offering employers an option to include a narrative of the causes of their organisation's gender pay gap. This narrative would have to be combined with one or more of the quantitative measures.
Organisations with 250 to 500 employees are encouraged to opt initially to publish information measured by at least one quantitative indicator. Organisation with more than 500 employees would be encouraged to report on two indicators, including a narrative. Within the next two years, these large organisations would be encouraged to move to using at least three indicators, including a narrative.
As an incentive to companies to adopt these reporting measures the Commission is offering a limited degree of immunity from investigation for firms that participate. This immunity will not extend to anti-discrimination cases, but will mean that participating companies are unlikely to receive formal requests for further information during the next two years.
The Commission will be producing guidance on these proposals in April 2010. It will begin monitoring the take-up of the metrics by large companies later this year, using a process that will allow encouragement and incentives for good practice; and provides a way of refining the proposed measures and methods of reporting with experience. Monitoring will be expanded to companies with between 250 and 500 employees next year.
Sir Trevor Phillips, chair of the Equality and Human Rights Commission, said: "I'm pleased that the Commission has been able to play such a unique role in coming up with some innovative and concrete solutions to begin tackling the issue of the gender pay gap.
"Our research shows that the majority of businesses in the UK realise that they need to address the significant differences between men and women's pay that still exist 40 years after the Equal Pay Act.
"Transparency is really the first step to addressing the gender pay gap. If an employer doesn't look at their own gender pay gap, how do they address it? By understanding that they have a gender pay gap problem they can start to take steps to address it. And, of course, it must make good business sense to be rewarding talented staff on merit and results rather than gender.
"Those that take up these measures will receive some immunity from our investigative powers. I hope this incentive combined with the goodwill and commitment shown by our partners so far means that we can deliver high levels of participation on a purely voluntary basis, ensuring that gender pay transparency will become normal business practice."
Rachel Dineley, head of the diversity and discrimination unit at Beachcroft, said: "The EHRC's proposals will have an impact on financial institutions in particular, where the gender pay gap appears to be the most extreme - with women currently receiving up to 80% less in performance-related pay than their male colleagues in some organisations.
"Transparency on pay is an admirable concept, but elusive to achieve in practice.
"Although publication of pay statistics could mean that they won't be investigated by the Commission, they will certainly be scrutinised by competitors, employees and job candidates, with potential dire consequences. It is possible that women employees of organisations which declare their statistics, could then be targeted by 'no win no fee' lawyers looking to encourage them to bring equal pay and/or sex discrimination claims against their employers. So should organisations take the opportunity to volunteer information? Many will feel that they will be damned if they do and damned if they don't.
"The EHRC's ambitions to close the gender pay gap are admirable - but in organisations with complex structures and a wide range of roles, there is a real risk of inappropriate comparisons. Stark figures presented on their own could be open to manipulation and misinterpretation.
"As such, employers need to consider carefully whether to publish, which of the three EHRC ‘menu' options for publishing statistics they choose, and, most importantly, that they ensure they carefully explain the basis of their analyses. The proposal for publication of such statistics is also contained in the Equality Bill, now going through Parliament, and remains a controversial issue."
