CIPD Voice: Issue 18

In the early hours of 5 April, when most of us were tucked up in bed, the CIPD’s labour market economist, Jon Boys, was busy crunching the data from the responses to the gender pay gap reporting for the year 2018/19.

Based on the 10,463 employers who had submitted by then (another 227 have submitted since then), he found that while the headline median figure got slightly worse between 2017 and 2018 – rising from 9.2% to 9.6% – the mean figure improved marginally from 13.4% to 13.1%.

Other findings include the proportion of organisations where the median pay rate for women is less than men has got slightly worse, increasing from 77.10% to 77.79%.

There is also a marked difference by region with the suggestion of a North/South divide. The median is lowest in Scotland at 5.7%, while The South-East and South-West are the highest, both standing at 11% median hourly gaps. This result likely represents the distribution of industries within regions. In the North certain industries with low pay gaps such as health, are overrepresented, and industries with large pay gaps, such as finance, are underrepresented.

By sector, the highest median gender pay gap exists in construction (24.35%) followed by finance (23.9%). Some industries, such as hospitality, have low gender pay gaps (a median of 0.6%) – reflecting the high proportion of both men and women on spot rates (a single rate of pay for a job, usually expressed as an hourly or weekly rate). The media focused on the fact that after one year, little improvement in terms of median pay for women had occurred. But is it unrealistic to assume quick progress given that the causes of the gender pay gap are complex?

The reasons of the pay difference are many and complex, and include historical notions about men being the ‘breadwinner’ in a family, higher value being accorded to jobs requiring traditionally ‘male’ qualities, the concentration of women in certain job roles, the concentration of women in part-time roles, childcare requirements, and women missing out on promotion opportunities due to maternity leave.

One of the criticism of the gender pay gap is that it confuses it with equal pay. A lack of awareness amongst the public has meant that the data reported for the gender pay gap was often interpreted as evidence of different levels of pay for the same work: something which has been illegal since the 1970 Equal Pay Act. As it is illegal to pay men and women differently for jobs of the same value, the reason for pay gaps it should be unlikely to be direct discrimination of women, yet this has been a narrative used to describe the issue.

Another issue is that it’s a single measure for a complex issue. As I’ve mentioned, a variety of factors are known to influence gender differences in pay, one of which may be discrimination within the workplace. However, this is likely not the single cause, nor in some environments may it be the largest factor creating gender differences in pay. Reporting on a set of numbers, without an appreciation of these other complex and related factors, may blind businesses and policymakers to the real cause of disparities in pay that must also be tackled through focused action.

Yet these issues are not insoluble. Through the publication of an action plan and a narrative, employers can put their figures in context, to explain the difference between equal and gender pay and to create a plan that focuses on the actions that they will take to reduce the gender pay gap.

The CIPD report Not just a number: lessons from the first year of gender pay gap reporting also shows that HR are getting better at disclosing their gender pay gaps. Around three in ten employers reported that:

  • The quality of the narrative explanation of their pay data will be better in 2019 than it was in 2018
  • They have better planned their 2019 submission compared with their 2018 submission
  • The quality of analysis they will conduct in their 2019 submission will be better than for their 2018 submission, and
  • The quality of data they use in their 2019 submission will be better than for their 2018 submission

Organisations that simply provide their numbers rather than provide a narrative and an action plan are failing to meet the increasing appetite and expectation for transparency amongst all stakeholders, including employees, investors, and regulators. Financial figures would never be given without any explanation for them, and gender pay gap reporting should be no different.

Gender Pay Gap Reporting Regulations should be updated to require organisations to produce a clear narrative, explaining the reason for their gender pay gap figures, and an action plan, outlining the initiatives adopted, progress to date and hopes for the short, medium and long term.

The narrative and action plan can be one document or two. Policy should avoid a prescriptive approach to action planning that may result in boiler plate reporting, and instead offer principles and a framework for action planning that enables meaningful and context-specific actions to be taken.

Another proposal is that more research into the impact of gender pay gap reporting should be carried out and used to improve current regulations. Gender pay gap reporting is still very much in its infancy, and little is known about the effectiveness of the policy in reducing gender pay differences over the long term. Critical research should be carried out to assess the impact and value of gender pay gap reporting from various stakeholders’ perspectives.

Charles Cotton

Charles Cotton: Performance and Reward Adviser

Charles directs the CIPD's performance and reward research agenda. He has recently led research into: how employers can help improve their employees’ understanding of their personal finances; how front line managers make and communicate reward decisions to their employees; how employers manage the risks around reward; how private sector employers can build the business case for workplace pensions; how employees form their attitudes to pay; and how the annual pay review process can become more strategic. 

He is also responsible for the CIPD’s public policy reward work and has given evidence to select committees on banking pay, redundancy awards as well as responding to various consultations, such as on pensions, retirement and MPs’ expenses.