Earlier this year, the UK’s gender pay gap reporting mandate came into force, obligating organizations with 250 staff or more to publish gender discrepancies in their payrolls by April 4 of next year. Some employers oppose the mandate because they say it will paint an unfair picture of their pay practices by not differentiating between group-to-group and role-to-role gaps, or between legitimate and discriminatory pay differentiation.
Few employers have reported their pay gaps yet, but already, the few revelations that have come out have led to headlines like “Financial services suffer from widest gender pay gap in UK“—not good news, but also, not exactly news. As such, British employers are concerned about the impact of this reporting on their reputations, particularly among those that do have large gender pay gaps. Personnel Today’s Adam McCulloch flags a new survey of senior professionals finding that 84 percent believed the requirements would damage organizations’ reputations and that 73 percent thought companies with large gaps would have more trouble recruiting:
The new research from public relations firm Golin also found that just over three-quarters (76%) of professionals agreed that organisations should be named and shamed for their gender pay gap and 77% felt that companies were likely to lose staff once the pay data was published. More than a third of respondents said that the issue was more toxic for companies than corporate tax avoidance and, perhaps most seriously, 39% of female respondents said they would consider leaving if their company reported a significant pay gap.
These findings are no surprise to us at CEB (now Gartner), as 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.
When employees perceive a pay gap, regardless of whether their perceptions are correct, this results in a 16 percent decrease in intent to stay. That’s 50 percent worse than the typical impact of a pay freeze. Because pay equity perceptions have such a strong influence on retention and employee morale, it’s incumbent upon organizations to be more transparent and communicative with employees about their pay gaps and what they are doing to close them. Fewer than 20 percent of organizations we surveyed said they communicate this information externally or to employees.
CEB Total Rewards Leadership Council members can read all of our latest research on pay equity here.