In April 2017, new regulations came into effect in the UK requiring all organizations with 250 or more employees to publish their gender pay gaps. One year later, the first round of mandatory reports showed that the median pay gap among those reporting stood at 9.7 percent, with 78 percent of firms paying men more than women. On a more granular level, the reports illustrated the great degree to which women’s underrepresentation in senior roles, especially those with high bonus potential, contributes to the pay gap in professional fields.
Now, a committee of MPs is urging the government to expand the reporting mandate to smaller firms, as well as to require companies to publish their plans for closing these gaps, the Guardian reported last week:
All companies with more than 50 employees should have to report their gender pay gap from 2020, said the business, energy and industrial strategy committee (BEIS). Currently only firms with more than 250 employees have to report their gender pay gap, leaving half of the UK workforce without knowledge of their workplace’s gap. The committee said the government had to take fresh action to close the gap, and should force companies to publish action plans and narrative reports about what they were doing to narrow it.
It also criticised the government for “failing to clarify the legal sanctions available to the EHRC [Equalities and Human Rights Commission] to pursue those failing to comply and we recommend that the government rectifies this error at the next opportunity”.
The committee called out those companies that excluded partner pay from their pay gap reports, including many of London’s major law firms, which its chair Rachel Reeves said “made a mockery of the system.”
Laura Hinton, chief people officer at PwC, told the committee that it was time for British businesses to start thinking about gender pay equity as more than just a compliance concern and couple their pay gap reporting with concrete action plans and accountability. The committee is proposing that boards of directors introduce key performance indicators for reducing pay gaps and that remuneration committees be required to explain how their pay policy decisions reflect their commitment to pay equity, according to Personnel Today.
Claire McCartney, diversity and inclusion adviser at the CIPD, welcomed the proposed requirement of action plans, which she said “means that firms will need to take the time to understand the reasons why the gaps are there, think about what needs to be done sustainably to reduce them and then take meaningful action in the areas that will make the biggest difference,” People Management added. Nonetheless, when it comes to extending reporting requirements to smaller firms, critics say it might be difficult for many businesses to comply, while the data collected from them might be less helpful in drawing conclusions about the state of gender inequality in the UK workforce:
“The larger employers have already found the regime difficult, complex and unclear even with their ability to access internal and external help to understand it,” [Crowley Woodford, a partner at law firm Ashurst] said. “Smaller employers are likely to try and work it out for themselves and therefore the accuracy of any disclosure may be compromised.”
Similarly, an Institute of Directors spokesperson told People Management the business organisation was concerned about the validity of pay gap data from smaller businesses, adding: “The smaller the sample size, the less useful the results become.”
Business leaders in the UK are paying more attention to the gender pay gap, perhaps as a result of the scrutiny brought about by the reporting requirement. A business confidence survey of FTSE 350 board members by ICSA: the Governance Institute, reported at the Guardian on Sunday, found that 69 percent of boards were looking to reduce the gender pay gap, while boardroom diversity was also a growing concern. While uncertainty over the consequences of Brexit looms largest in directors’ minds, contributing to a decline in confidence, the survey findings suggest that more of the UK’s corporate leaders are now seeing diversity and pay equity as urgent business matters that merit their attention.
Our own research at Gartner has found that gender pay inequality harms employee pay perceptions, morale, and retention, so this is certainly an issue that affects the bottom line. Meanwhile, the cost of closing pay gaps is growing from one year to the next, so there’s a strong motivation for organizations to tackle this problem sooner rather than later. Most organizations are trying to do just that, but are not confident that their efforts are working. As it turns out, pay equity is a multifaceted challenge without a quick fix, but there are a number of concrete actions HR can take today to begin closing pay gaps and prevent them from re-emerging. Gartner Total Rewards Leadership Council clients can learn more about the business case for addressing pay equity here.