Gender Pay Gap – The Dust Has Settled

Employment Law Alert

The Dust Has Settled on the Gender Pay Gap Disclosures and What Have We Learnt? – UK Employment Law Update

1. Mandatory reporting under the methodology required by the government indicates some large pay gaps. What does that mean?

As of 17 April 2018, 10,364 employers had published their gender pay gap figures. What have we learnt? That almost eight out of ten employers are paying men, on average, more than women?

Well … yes – sort of, but that's not the full picture. Remember, gender pay reporting is an entirely different calculation to that of equal pay (and pay equity in the U.S.) – you cannot conclude that an average gender pay gap of 59 percent means that a female employee earns 41p for every £1 her male colleague earns. A more accurate, but admittedly less provocative, title for reporting would be the 'gender opportunity gap' or, as energy company Shell coins it, the 'talent gap'.

Generally, a high mean gender pay gap indicates that significantly more men than women occupy senior management positions, which naturally command the highest salaries. To see just how significant and imbalanced these salaries are, the published salary quartiles helpfully provide context.

The median gender pay gap is more representative of an employer's workforce, as it focusses more on gender distribution (together with the salary quartiles) and is less susceptible to the extreme high and low earners. A high median gender pay gap indicates that women flood the entry- or lower-level roles which, unsurprisingly, offer the lowest salaries.

In many disclosures, the difference in bonus pay between men and women is significant. However, a large contributory factor here is that part-time employees (predominantly women) who receive bonuses would receive a pro rata amount (i.e. a lower amount based on working days). Yet, in accordance with the instructions in the Regulations, this pro rata figure is used for the calculations – not the notional full-time figure which would allow a like-for-like comparison – and this indicates lower bonus payments, where they may actually be the same as a full-time employee in real terms. Whilst this may forgive some of the figures, we should not forget that part-time work is plagued with a lack of progression and stagnant pay, which takes us back to where we started and what these numbers really show.

2. It's 2018. Why is this there still a representational disparity?

What are some of the factors impeding women from rising to the higher-paid positions in companies despite all of the programs in place at many companies designed to create more women at the top? Without doubt, the biggest factor (and one which many employers are still reticent to discuss) is children. It is during the childbearing years that the gender pay gap starts to widen. The Equality and Human Rights Commission (the body responsible for enforcing these Regulations) reported an impressive negative median gender pay gap of -8.2 percent (phew!), which they say has been achieved by concentrating on agile and flexible working policies and progressive maternity, paternity and shared parental leave policies.

These types of policies are going to be crucial to closing the gap. Employers cannot expect women, who traditionally take the brunt of caring responsibilities in the UK (be it of children or elderly relatives), to replicate the working practice and patterns of men, whilst juggling these caring responsibilities.

Discrimination in the workplace may also be a factor at some companies. Many employers have introduced training to increase awareness of unconscious bias and harassment following the recent #MeToo movement. Online retailer Ocado has a negative median gender pay gap of -1.9 percent, something it attributes in part to the rolling out of unconscious-bias training.

Unilever (where women's median hourly rate is 1.3 percent higher than men's) is another example of an organisation committed to driving greater representation of women in higher-paid positions. In addition to improved family-friendly policies, Unilever reports changing its approach to recruitment, focusing on ability rather than, for example, subject choices which carry gender-stereotypes. Attracting women at entry level will continue to be critical in sectors where they are significantly underrepresented (science, technology, engineering and mathematics), and many employers in these areas are reporting focussed initiatives to drive interest of women.

3. The bigger picture

The majority of commentators rush to chastise those employers with the largest gender pay gaps – but that approach is superficial and unfair. Many large employers do have pay gaps that they will not be happy about, and this is particularly so in traditionally male sectors, such as finance.

However, many of these large employers feature in the Times Top 50 Employers for Women. This is because they have not been waiting for the UK to introduce mandatory pay gap reporting but have been taking this matter seriously for years and working to address it in an extremely positive manner. This means there are already numerous initiatives in place which support women in the workplace, encourage their applications at entry level, assist their return to work after taking time out and promote dynamic and flexible working. Yes, there will always be room for improvement, but this is a good example of how the figures are not borne out in reality.

Many employers, such as Apple, have already funnelled available resources into equality and inclusion and have seen improvements as a result, with women under 30 in management increasing by 12 percent in the last two years.

It is also worth pointing out that, sometimes, the headline figures are misleading. Take Boux Avenue, a lingerie retailer. Boux Avenue reports one of the highest median and mean gender pay gaps to date, both above 75 percent. Surely, for a women, this is the employer to avoid? Taking a closer look at the figures, specifically within the context of the salary quartiles, the figures can (almost) be justified. Men occupy only the top quartile, and only 9 percent of that quartile. The absence of men in junior roles means that the gender pay gap is inflated. Men may earn no more than women at Boux Avenue; in fact they could earn less – there are just fewer of them and they are concentrated at the top. So perhaps not a bad place for a woman to work after all, especially as 91 percent of the top quartile are women. Whilst context is important, it is still frustrating that in a company that is dominated by women – men only feature at the top.

4. Taking action

The Equality and Human Rights Commission should have now written to all employers who have failed to comply with the Gender Pay Gap Regulations as part of its (extremely late-in-the-day announced) enforcement regime, which will allow these errant employers a further 28 days to submit their figures. Employers who submit 'statistically improbable data' may also be subject to enforcement action at some point in the future, but the ECHR want to focus on non-compliance initially.

Their job might actually be easier than they thought because, although one week before the final deadline for publication approximately 1,300 employers had still failed to report, there was a predicted last minute rush and more than 10,000 employers have now published, which is 1,000 more than the original estimation of employers who were caught by the Regulations. The ECHR therefore can sigh in relief that their extremely limited resources can be deployed elsewhere – or maybe they can shift their focus onto the numbers disclosed?

Where companies fail to co-operate with notified concerns, the EHRC has powers to investigate, demand detailed action plans and apply for court orders and notices. An employer will commit an offence if it fails to comply with a notice or court order and risks an unlimited fine. The biggest risk, however, as we have seen by the rush to report, and report on time, is reputational.

5. What next?

While the gaps reported under the required methodology in the Regulations can be high in some cases, it is important to remember that these numbers do not tell us that a company has any pay unfairness when comparing men and women who do substantially the same work. However, there is no doubt that the Regulations have added to an important conversation about representation of women in higher-paid positions.

And remember – this is not a one off. The snapshot date for grabbing the data for the next publication in April 2019 has already passed, and therefore before we know it, we will have a new set of pay disclosures and narratives that we can compare against this year's. It may take years before the pay gap is closed, but watching how this develops year on year will be fascinating for all concerned.