When paying men and women, can you prove you are being fair?

By Dianah Worman, Diversity Adviser, CIPD 

Forty five years after the introduction of the Equal Pay Act, the Government launched a consultation document ‘Closing the gender pay gap’ to explore views about how to develop regulations to implement the legal obligation incorporated in the Small Business, Enterprise and Employment Act 2015 by the previous Coalition Government.

This law will make it compulsory for private sector businesses of 250 staff or more to report on the gap between the average level of pay of men and women within their organisations. This obligation delivers to the primary duty, included in the Equality Act 2010, for employers to give men and women equal pay for work that is the same, broadly similar or rated as equivalent under a job evaluation study, or found to be of equal value in terms of effort, skill or decision making.

The new compulsory duty will change the voluntary approach adopted by the previous Government which informs the influential and ongoing Think, Act, Report (TAR) initiative. TAR, along with other important voluntary actions to progress female talent in business, also encourages employers to report voluntarily on their gender pay gap but, so far, it has resulted in just five companies in the targeted group doing so (Tesco, Friends Life, PricewaterhouseCoopers, AstraZeneca and Genesis).
We don’t know how many other companies targeted by TAR have either looked at, or plan to look at, their potential gender pay gap under the voluntary scheme. Some employers may feel it’s the right thing to do but fear transparency if they find a gap, and shirk the embarrassment of publishing it because of the perceived damage to their corporate reputation.

It’s important to draw a distinction between equal pay and the gender pay gap – obviously the two are related and a lack of equal pay between men and women is a clear contributory factor to the gender pay gap. Employers have a vital role to play in helping to close the gender pay differential, and pay transparency is an important first step. However, there needs to be much wider and concerted progress. Actions to overcome deep-seated labour market segregation, which is a major cause of the gender pay gap, have to be at the top of the ‘to do’ list. Some of these wider contributory factors are flagged up in the Government’s consultation document, including better careers advice for girls and tax free childcare, will hopefully improve access for women to better-paid work. 
While an employer may have a gender pay gap, it is important to stress that this does not mean, by default, that it has failed to pay women the same rate of pay according to equal pay legislation and could, therefore, face a potential equal pay case. Nonetheless, all employers should be encouraged to undertake an equal pay audit in order to ensure that their pay rates are fair and legally compliant.

The fact that reporting will become compulsory when the new regulations come into force demands that companies take action fast to put their houses in order to safeguard themselves against future legal action, bad press coverage and being found wanting when it comes to being a fair employer.

There are, however, potential pitfalls associated with the Government’s strategy to force employers to focus simply on the gap between the average pay of the men and women they employ. A single figure that needs to be published can give a distorted picture of how inclusive pay and reward policies and practices are when it comes to individuals and their pay comparators. This can lead to employers taking false comfort about their vulnerability to legal challenges. It can also stop them from carrying out a more thorough audit that exposes underlying illegal weaknesses and disparities and could fuel the possibility of legal cases being taken against them.

This is a fundamental shortcoming, even though the consultation does ask for views on how and where average pay gap figures should be published.

To make the Government’s overarching strategy more robust, authentic and viable employers should be encouraged to take a more detailed look at pay distribution patterns in order to expose unjustifiable gaps, find out what causes them and how to stop them from happening before publishing single pay-gap figures for their organisations.

There are no quick fixes to closing the gender pay gap. Encouraging a focus on a single differential figure could distract attention from essential root and branch change, as recommended in the TAR initiative. These essential building blocks can overcome many of the barriers which impact on women’s career paths and earning potential and are essential to trigger systemic change and counter similar pay gaps recurring. Underlying problems leading to pay disparities could be caused by biased appraisal and performance management policies and practices, for example, to say nothing of the wider societal and economic factors that contribute to the gender pay gap. Exclusive attention to the pay gap itself in an organisation could tempt employers to respond inappropriately with quick monetary fixes, resulting in perpetuating rather than removing problems.

The best advice for employers is – don’t panic. But be serious about checking that the earnings of male and female employees are fair and any differences in pay are justifiable. There is no point in deferring action on tackling any disparity between men and women’s pay, and nothing to be gained from taking short cuts. Employer action on this front will demonstrate good intentions and purpose in addressing the remaining stubborn challenges we face in removing the gender pay gap after decades of trying to do so. Don’t avoid it because it seems burdensome and time consuming – the business case for being a diverse and inclusive employer is well evidenced by leading-edge employers. If you want people to feel truly valued and engaged, ensure that they are treated fairly when it comes to their pay packets. Pay disparity suggests that this may not happening.

* The CIPD are planning to respond to the Government consultation on closing the gender pay gap and would be very grateful for member views to inform this. You can complete our specialist survey (which closes on the 23rd August) here:

https://www.surveymonkey.com/r/cipd-gender-pay-gap 

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