Date: 04/04/17 | Duration: 00:17:08
This April new legislation comes into effect that requires organisations of more than 250 employees to gather data and report publically on their gender pay gap. These regulations come five years after the Government’s Think, Act, Report initiative aimed at encouraging voluntary transparency around equal pay in organisations. Today, however, despite such efforts, women working in the UK are paid on average 18% less than men and there is still a widely recognised under-representation of women in senior leadership positions.
The new gender pay gap reporting legislation aims to drive change by highlighting these issues and encouraging organisations to both understand their own pay gap and to work to improve it. In this episode we talk to Sheila Wild, Equal Pay Portal, and Ben Willmott, Head of Policy at CIPD, about what the legislation is demanding of employers and the impact it could have on organisations and employees, as well as the practical considerations for HR professionals.
View the full podcast transcript
Philippa Lamb: Welcome back. This month we’re looking at equal pay, well unequal pay might be a better description because even though we’ve had equal pay legislation for nearly half a century average hourly pay for women is still 18% lower than men’s. Now obviously this canyon has not gone unnoticed for the past 47 years, far from it, various steps have been made to close it and we covered the last one four years ago. That was two years into the Coalition Government’s Think, Act, Report initiative. If you remember that plan, rather optimistically, urged employers to voluntarily publish their gender pay gap. Here’s a clip from the podcast we made about it at the time. Jo Swinson was Equalities Minister back then.
Jo Swinson: We’re delighted that so far 55 employers have signed up to the initiative and that's now covering more than a million people within the workforce.
PL: A million employees but what have we got 29 million people employed in Britain right now so we’ve got a long way to go on this haven’t we?
JS: Well we certainly do need to do more on this and I think…
PL: And they certainly did need to do more, that report did not do the job. Now we have new legislation targeting the pay gap and this time it has some teeth.
Ben Willmott: The government has felt that the voluntary route has been tried and has failed. The Think, Act initiative was an attempt to try and encourage employers to provide more transparency over gender pay.
PL: They had high hopes for it didn’t they but it just didn’t work.
BW: No I think the uptake was very, very low and coupled with a stubbornly high gender pay gap of nearly 14% I think government probably felt enough was enough and there had to be a bit more of a hard nudge to get employers to take this agenda really seriously.
PL: It’s no exaggeration to say that Sheila Wild knows pretty well everything about gender pay. She spent 27 years with the Equal Opportunities Commission leading their work on gender equality. She then moved to the newly created Equality and Human Rights Commission to lead on equal pay and age and after leaving there she set up a website called Equal Pay Portal. Its aim is simple to help people get their heads round equal pay and the pay gap.
Sheila Wild: I've been working on gender pay gap issues for almost 40 years.
PL: So she's charted every step of the road that's got us to where we are now.
SW: And so we got to this point originally 1970, I wasn't working on it in 1970, I do stress that.
PL: That seems unlikely looking at you! But does she believe that mandatory gender pay reporting will succeed where other government action has failed?
SW: One of the problems with Think, Act, Report was it was entirely voluntary and nobody followed up on it.
PL: So people just didn’t get on board with it.
SW: People just didn’t get on board with it. This is a very different initiative. It’s a very interesting halfway house between regulation and voluntary in that there is a regulatory framework.
PL: Well shall we just start by saying what the requirements are, what do people have to do?
SW: People have to report on their gender pay gap in six different ways. They have to report on the mean and the median gender pay gaps, the mean and the median bonus pay gaps, the proportions of men and women getting bonuses and the quartile pay distribution of men and women. The resulting calculations give a framework within which individual employees in particular but also members of the public, interested parties like myself or journalists will be able to take a view on the size and shape of the gender pay gap in any organisation employing 250 or more employees and will be able to ask, I think, quite intelligent questions about that gender pay gap.
PL: Now those calculations have to be published on their own website and on a government website within 12 months. They will give us league tables and then we’ll all see which employers have the widest gaps and which have the narrowest or indeed no gap at all. But the data is only part of the story.
BW: The more important bit is what do you do with your data, really understanding if you do have a gender pay gap what are the causes behind those pay gaps and how do you address them and so what are your people management and HR practices that are going to help address pay gaps where they do exist within the organisation.
PL: Yes because you can see a scenario where organisations are going to be a bit shocked by the numbers they come up with but as you say it’s not necessarily the case that they’re running their organisation in a gender biased way there's lots of reasons aren’t there where they might have surprising numbers.
BW: I think that's the thing that employers really need to get to grips with. There may be bits of the gender pay gap that they really do need to focus on in terms of making sure that they’re addressing any discrimination or unconscious or conscious bias within the organisation but at least as big a problem is issues around occupational segregation so that the choices that boys and girls make in terms of subject choice at school, the sort of occupations that they ultimately go into, a lot of that is down to the quality of information, advice and guidance that young people receive at school, but also employers need to look at how they engage with education providers with schools and colleges making sure that they are telling young people about the opportunities that are available regardless of people's gender.
PL: So the numbers can be misleading and it is really important to understand your own narrative and to publish it alongside your figures.
SW: Poor numbers don’t necessarily tell a bad story. If I can give you an example back in the summer the Bank of England published its pay gap figures and the Bank of England actually had quite a positive story to tell, it’s published its mean and its median gender pay gap and it also has quite a simple pay structure. It published a little chart showing you how pay was distributed and then said what it had been doing over the past few years to bring women into the Bank of England and then said, “But we have a problem, we only take on Economics graduates and only 23% of UK Economics graduates are women, a really good explanation of why we have a gender pay gap and why. It’s not our fault and we are doing our best to put it right.”
PL: Outside the organisation.
SW: Outside the organisation. But nonetheless trying very hard to put things right.
PL: And it’s probably worth pointing out here that pay equality and gender pay gap these are not the same things.
SW: They are not the same things and here again commentators will have to be cautious. If I had a fiver for every five minutes I've spent on the telephone with a journalist who doesn’t understand the difference between the two I would be a very wealthy woman.
PL: Rehearse it for us now.
SW: Equal pay is a contractual right which means that you have a contractual right to be paid equal pay for doing equal work.
PL: Work of equal value.
SW: Equal work.
PL: Equal work.
SW: Equal work, which is a portmanteau word, like work, work that has been rated as equivalent under a job evaluation scheme and as you say work of equal value. People always forget those two key words equal work and they just look at the pay figures, they just say, “Oh there's a pay gap. Somebody’s discriminating.” No there can be perfectly legitimate reasons for the pay gap – London allowance is a perfectly legitimate reason for the pay gap. The fact that he is better qualified than I am is a perfectly legitimate reason for the gender pay gap. The fact that I've been there longer than him and am earning more than he is can be a legitimate reason for the pay gap. So plenty of legitimate reasons for a pay gap. But an equal pay gap is, as I say, it’s an individual right and it can only be disclosed through the employer actually looking at the individual salaries of men and women doing equal work and only the employer can tell you whether those people are doing equal work.
The gender pay gap is about something completely different, it’s about aggregate figures and the averages that you draw from them and it’s much bigger. The gender pay gap includes the unequal pay gap but the unequal pay gap is actually quite a small component of that much larger gender pay gap.
PL: And looking at the gender pay gap won't necessarily tell you whether you are paying equally?
SW: It can't possibly tell you.
PL: Do you think people understand that?
PL: Is that going to be the big problem here?
SW: That could potentially be the big problem and that is another reason for encouraging organisations to include a narrative account of what they’re doing so that they can set the context. There are certain high risk indicators. So, for example, if you have a high mean gender pay gap and a high median gender pay gap and high bonus gaps then you really ought to take a long hard look at your pay system and check that there's nothing discriminatory about it. That’s not to say that you have got a discriminatory pay system only that you are at risk of having one and it would be a good idea to take a deeper look at it.
PL: So even for people who think they understand these issues it’s complex isn’t it and this is an opportunity for them to really dig in to what exactly is going on within their own organisations.
SW: One of the key points I'm making when I'm talking to organisations about the introduction of this and encouraging them to prepare for it is that you have got to understand your own gender pay gap because if you don’t understand your organisation’s own gender pay gap you cannot expect the outside world to understand it.
PL: So although it’s not mandatory to publish a narrative the hope is that the system will be self-regulating and that organisations will, if only to avoid their gender pay gap being interpreted more negatively than perhaps it should be.
BW: Unless employers publish that narrative alongside their numbers then there is a real risk to them that if the local press gets hold of that data in isolation and an employer hasn’t explained, “Well actually that's because we’ve got a high proportion in IT roles and that actually if you look at the economy men are much more likely to be taking up those sorts of jobs so it’s not necessarily an issue specific to us as an organisation, that might be part of the reason why you have, across the organisation, a gender pay gap.” So those sorts of explanations are really, really important so that you can explain where you do have a justifiable pay gap compared to one which is based on discrimination.
PL: And acknowledge yes where you do have one that's based on discrimination.
SW: But of course absolutely call out and acknowledge where there are issues where you need to improve your practices and address bias within the organisation.
PL: The intention is that this will bring about change because employers risk reputational damage if they're seen to have a substantial pay gap. But what if they don’t play ball? And what if they don’t publish their figures? Will anything happen?
SW: If the government chooses to name and shame people who don’t report at all on their gender pay gap then the reputational damage could be quite considerable.
PL: Can you see the government doing that?
SW: I can now they’ve started to do it on the national minimum wage but I'm choosing my words carefully here. You will notice I said, “Those who choose not to report at all.”
SW: My question mark is over those who partially report.
PL: So they give the data to the government but they don’t put it on their websites?
SW: No I think more likely is that they report on their mean and median gender pay gaps but they don’t report on their bonus gaps and then someone will have to do some investigating to find out whether in fact they haven’t reported on their gender bonus gaps because they don’t give bonuses or because they’re choosing not to report on their gender bonus gaps.
PL: Okay so this is a resource-heavy system.
SW: This is a resource-heavy system.
PL: And will it happen?
SW: Well I don't know that's the big unknown. But there is a further sanction in there in that a failure, and I don't know what is meant by a failure let’s assume it’s a failure to report at all, does amount to a breach of the Equality Act 2010 and that does mean that the Equality and Human Rights Commission could potentially take action against you.
PL: Sheila has written the CIPD Guide on Gender Pay Reporting. It is free for members and you can get it on the CIPD website. And what will that tell people?
SW: It will summarise what the regulations require you to do. It will tell you why these regulations have come about; because that's something I've found people want to know. Again that's a difference between this and previous initiatives. There is something quite different about this one and people want to know why it’s happening. It’s happening because we the public are increasingly asking questions about pay. We’ve got an appetite for pay transparency. We want to know why men and women are earning different rates of pay. It’s a big issue for the economy and that really is the government’s interest in this. I think no disrespect to the government’s commitment to equality which I don’t question but I do think this is more of an economic issue for the government than an equalities issue. It’s been estimated there would be a huge amount of benefit to UK GDP if we could close the gender pay gap. And I think that’s what the government is keen on.
PL: It’ll also explain the history of the gender pay gap, the lessons we can learn from that and the calculations you'll need to do before you do your mandatory calculations.
SW: And then we will look at what the regulations actually mean. So if you get your median gender pay gap figure and if you get your mean bonus figure what do they actually tell you? They’re not just a figure they’re pointing you in the direction of something. For example, the mean read alongside the median tells you much more than either of those two figures read in isolation.
PL: And then perhaps most importantly of all it will help you figure out how to tackle your pay gap if you do have one. So when we’ve had pay reporting for a few years things could start to get interesting but where does Sheila think the policy will be in say five years’ time?
SW: It will be very interesting to see where we are in five years’ time. The regulations have got a review programmed in for five years’ time. On a worst case scenario the whole thing could be scrapped. I think that would be disastrous and I hope it doesn’t happen. A much more likely scenario is that some adjustments are made to the calculations.
PL: So there may be some tweaking.
SW: There may be some tweaking. There may be some tweaking. There is almost certain to be a reduction in the threshold. The current threshold is 250 or more. For some parts of the public sector it’s already 150 because of the public sector equality duty. In Scotland they’ve already reduced it to 20.
SW: So my guess is that it will come down from 250 to 150.
PL: Employers can get ahead of the game by understanding their own data, formulating a message and getting to work on practical measures to tackle their pay gap. The reporting deadline is April next year but Sheila warns there is plenty of work to do and real legal and reputational risk for those who don’t get it done. More positively she believes we have finally arrived at a great moment.
SW: It’s a huge opportunity and one of the things I like best about it is for the first time ever all employers are in this together. If you employ more than 250 employees, whether you’re in the private sector, the voluntary sector or the public sector, you have to do this. And that's the first time we’ve been in that position.
PL: There'll be more on this on the CIPD website. Sheila’s essential guide to Gender Pay Reporting, a fact sheet and a webinar to get you right up to speed with everything you need to know.
Thanks for listening. Join us again next month.