The deadline for UK companies with at least 250 employees to publish their gender pay gaps arrived on Wednesday. According to the BBC, more than 10,000 companies in total submitted their data, 1,000 of them waiting until the last day to do so. Overall, the median pay gap among those reporting stood at 9.7 percent, with 78 percent of firms paying men more than women, 14 percent paying women more, and 8 percent reporting no pay gap at all. An analysis in January had predicted that a significant number of companies would ultimately miss the deadline, and indeed, hundreds have failed to report, Rebecca Hilsenrath, chief executive of the Equality and Human Rights Commission, told the BBC:
“We’re looking at approximately 1,500 companies which haven’t reported,” she told the BBC. “We’re obviously pleased with the rate of reporting, but it is the law, it’s not an option. It is the right thing to do, and we will be enforcing against all those organisations which failed to meet the deadline.”
In practice, this would mean a statutory investigation process, she said. The EHRC will be sending letters to all of those organisations on Monday. They will then have 28 days to respond. Terms of reference will then be issued for the enforcement process, which will be made public. “This is going to be a very public affair. It will impact quite considerably on members of the public, people who work for them, and you’ll see a growing backlash against people who aren’t complying,” she said.
The EHRC had previously warned that organizations face “unlimited fines” for failing to comply with the gender pay gap reporting law. The more effective punishment, however, may be the “very public affair” Hilsenrath is promising. Senior British professionals indicated in a survey late last year that they believed revelations of large gender pay gaps would hurt companies’ reputations and cause them to lose employees, with more than a third saying they thought this issue would be even more reputationally damaging than corporate tax avoidance.
At CEB, now Gartner, our latest research into pay equity finds that perceptions of pay inequality can be just as harmful to employee retention as pay inequities in fact—and the perceptions tend to be even worse than the facts.
Naming and shaming companies for revealing inexcusable gender gaps (or worse, defying the law and refusing to disclose them) is part of the fundamental premise of the reporting requirement. Imposing this often awkward form of pay transparency on large companies serves as a direct challenge to them to change their cultures and make gender equality a priority, Liz Alderman writes at the New York Times, pointing to example like EasyJet, whose CEO took a pay cut to match the salary of his female predecessor and pledged to hire more women pilots:
In other cases, a change in the pay culture has been pushed from the outside. At Mills & Reeve, a British law firm whose audit determined it was paying women an average of 32 percent less than men, a major impetus has come from big clients that have started to request more female representation among the firm’s attorneys. …
Some efforts predate the new rules, but have come into focus because of the requirements. … Supporters of the British regulations acknowledge that transparency alone won’t solve the problem. But without it, companies and regulators in countries seeking to enforce equal pay laws would have scant evidence that a gap existed — and face less pressure to address it. Jake Rosenfeld and Patrick Denice, sociologists at Washington University, found in a study that salary transparency raised wages, in part because “even being cognizant of gender pay disparity” helped change norms.
The gender gaps reported here are not questions of role-to-role pay discrimination based on gender, which was already illegal in the UK. Instead, they measure what women earn throughout the organization as a whole compared to their male colleagues. Critics of the reporting requirement have argued that these gaps unfairly tar companies as sexist for naturally-occurring pay gaps, but one of the important revelations to come out of the reports is the extent to which women in the UK are concentrated in lower-level, lower-paying roles while senior roles with greater earning potential are dominated by men. The question now, Washington Post business columnist Jena McGregor emphasizes, is why:
[B]y shining a glaring spotlight on what’s been called the “position gap” — or how many fewer women are on the higher rungs of the corporate ladder — the U.K. data also reveals a rare company-by-company look that could have a real impact, some experts say. Companies’ inability to hide potentially embarrassing figures could prompt more pressure to show they’re boosting the number of women in the higher ranks.
“We’re going to be able to track this over time,” said Gail Greenfield, a principal at the New York-based human resources consulting firm Mercer. “The first year, maybe they get a pass and are able to say, ‘We didn’t quite understand our situation.’ Next year, when they report again, they can’t say that.”
Bloomberg’s Lucy Meakin discusses the untapped economic potential:
Unsurprisingly, the reasons for the pay gap include more men in senior roles, and a greater proportion of women work part time. But the issue is more than one of fairness. For an economy held back by weak productivity growth and skill shortages, the under-utilization of women in the labor force represents a major cost.
“We really need to identify where potential is within our own workforce and population,” said Jana Javornik, director of the Noon Centre for Equality and Diversity in Business at the University of East London. “I think of the gender pay gap as being an intelligent summary — a measure of all those systemic issues going on. It could be a very good indicator of where to focus strategically and which are the untapped potential.” …
McKinsey estimates that eliminating the disparity could add 150 billion pounds ($211 billion) to annual gross domestic product by 2025 by boosting female participation, encouraging them to work longer hours and moving them into more productive jobs such as those in science and engineering. Research by PricewaterhouseCoopers puts the figure even higher.
“Gender pay gap reporting could boost productivity by encouraging employers to explore whether they are making the most of their talent,” said Charles Cotton, who heads the performance and reward research agenda at the Chartered Institute of Personnel and Development.
Helene Reardon Bond, an expert in the gender pay gap who helped devise the reporting requirement, tells the Guardian that this is just the start of a long conversation about gender inequality in the workplace, but it’s a big first step:
“The gender pay gap deniers will say that the gap only exists because of the choices women make, but while everyone makes choices women make constrained choices,” she said. “This is absolutely monumental: we have got people from all different industries and walks of life sitting down and talking about this. Most businesses have never worked out their gender pay gap. Well, now they have, the question remains what they will do about it.”
To that question, Miriam Kenner at People Management solicits the input of several experts as to what companies can do to start closing the gender gaps in career advancement and leadership:
Rachel Mapleston, business analyst at MHR, said that as women “predominantly take on the responsibility of childcare, flexible working provides them with the opportunity to take on more senior roles without it conflicting with childcare commitments”.
Firms must also evaluate their recruitment processes to avoid male-focused preconceptions about roles, and tackle unconscious bias with internal training, Mapleston suggested. Freddie Alves, managing director of inclusion with purpose at Talking Talent, said it was “necessary to look at supporting women around the typical pinch points of their careers. These tend to be during periods of change and transition.”