As UK Organizations Publish Gender Pay Gaps, Questions Arise Over Enforcement

As UK Organizations Publish Gender Pay Gaps, Questions Arise Over Enforcement

As an early April deadline draws closer, reports continue to trickle in from organizations in the UK with over 250 employees that are now required to publish their gender pay gaps under rules that came into effect last year. The full list is available for download from the UK government and the press has been busy digging through it to see what the gap looks like at large, household-name brands, as well as to identify the worst offenders. Sky News reported last week that, as expected, most of the reports so far show male employees earning more, including those of some familiar companies:

Government figures show that men are paid nearly 65% more per hour at high street fashion store Phase Eight and nearly 52% more at EasyJet. Organisations with 250 or more workers must publish their figures by April, and so far 527 firms have done so. Nearly half of the organisations pay men at least one tenth more per hour and 426 of them pay men more, on average, per hour. …

Public sector bodies that show a wide divergence in pay per hour include the Royal Orthopaedic Hospital in Birmingham (men paid 34.8% more than women), and the Office for Nuclear Regulation (32.9%). Many of the firms in the top 20 in terms of those with biggest gaps are in financial services, including Virgin Money (32.5%), PriceWaterhouseCoopers (33.1%) and asset management firm Octopus Capital (38.1%).

In addition to financial services, businesses in the construction and information and communication technology sectors are reporting some of the widest gaps, the Financial Times has also reported. They add that a scant 70 employers, or 14.6 percent of those that had released their figures as of earlier this month, reported negative pay gaps as of January 1, most of which are smaller organizations working in health care and education. Nationwide, the median gender pay gap stood at 18.4 percent for all employees and 9.1 percent among full-time employees only.

The Equality and Human Rights Commission, the body in charge of enforcing the pay gap reporting regulations, has warned employers that they face “unlimited fines” if they dodge their reporting obligations. It’s not clear, however, whether the EHRC actually has the power to impose these fines, one legal expert told People Management’s Marianne Calnan last week:

Anna McCaffrey, senior counsel in Taylor Wessing’s employment, pensions and mobility group, told People Management that because the government opted not to include in its regulations any specific civil or criminal sanction around gender pay reporting, the EHRC lacks the power to impose the sanctions it has proposed.

The lack of power to enforce criminal or civil sanctions, first reported by the Financial Times, could mean many companies will simply fail to report their gender pay gaps accurately – or will not report at all. McCaffrey added, however, that there may be “negative publicity and reputational issues” in store for companies that are found not be to complying with their obligations, which may lead to regulatory enforcement.

Despite these risks, Calnan’s colleague Emily Burt highlights an analysis suggesting that as many as one in ten affected organizations would miss the deadline:

The deadline for companies to publish their gender pay audit data is 4 April 2018, while public sector organisations have to report by 30 March 2018. However, analysis from accountancy firm RSM has found that 90 per cent of affected companies have yet to comply with their gender pay reporting requirements, with only 502 of 9,000 recently surveyed business stating they had already reported.

While 77 per cent of businesses surveyed by the firm said they had already published or were on track to publish their gender pay gap report on time, 10 per cent said they would be unable to meet the deadline.

In addition to the legal and reputational risks that come with skirting these regulations, our research at CEB, now Gartner, shows that companies also face serious risks to employee engagement and retention if they are perceived to have a gender pay gap. The negative impact on retention among employees that perceive a pay gap in their companies is:

  • Equivalent to a high-performing employee being rates as meets expectations or lower,
  • Equivalent to an employee believing they could earn 30 percent more doing the same job at another company, and
  • 50 percent worse than the effect of a pay freeze.

If the above negative impacts to retention aren’t enough, organizations perceived to pay men and women unequally can also almost certainly expect a negative impact on their ability to attract top candidates.

This is all to say that companies that flout regulations aimed at fixing pay gaps, or try to avoid addressing the issue, will pay the price in terms of their ability to attract and retain talent when they are found out. Based on our research, we can say with confidence that taking steps to address pay inequality and the gender pay gap isn’t only the right thing to do, but also makes business sense. CEB Total Rewards Leadership Council members can read all of our latest research on pay equity here.