Recent Office for National Statistics data shows that London has only been able to narrow its gender pay gap by 0.6 per cent over the last 20 years and, given the better progress made in other regions, it now has the highest regional pay gap in the UK. There may be many reasons for this, but the increased dominance of the financial services sector in London will be a major cause given that this industry tends to have one of the widest pay gaps.
These latest statistics arrive amid the current requirements for all UK organisations with 250 or more employees to publish specific information about their gender pay position. This includes details of mean and median gender pay and bonus gaps, as well as a gender breakdown of highest to lowest earners and bonus recipients.
However, three-quarters of the way through the disclosure year, less than 5 per cent of the estimated 9,000 employers required to disclose have published their gender pay details. One reason behind this delay is that organisations that assumed they did not have a problem have uncovered higher gaps than they anticipated and need to take time to consider how they explain those gaps to their employees and stakeholders. Crucially, they also need to look at what they will need to do to address their gender pay gaps and, ideally, develop action plans as well as clear and consistent internal messaging.
A crucial starting point is to understand how the gender pay gap is broken down. This will involve obtaining more data than is required by the regulations to include grade, location and levels of experience of employees. Further, the distinction between ‘demographic’ factors – those caused by gender representation across the grades – and ‘non-demographic’ factors (ie gender pay differences between comparable employees) is critical. By understanding this breakdown, organisations will then be able to explain and address their gender pay gaps much more effectively.
Demographic gaps are typically caused by an overrepresentation of male employees in senior highly paid roles and/or an overrepresentation of female employees in the most junior roles. This has the impact of increasing the average male salary across a business.
As part of an informed action plan, employers should therefore be identifying diversity challenges and finding ways of breaking down barriers to female recruitment, retention and promotion at senior levels and/or the recruitment of more men into junior roles. By taking steps to equalise gender representation across all levels, organisations will start to see significant reductions to their gender pay gaps.
Reviewing policies and procedures to encourage more women at certain grades is likely to be beneficial – for example, reviewing the effectiveness of flexible working and parental leave policies and leadership and talent programmes is likely to be particularly helpful.
In contrast, non-demographic gaps relate to employees performing broadly comparable work. When analysing their gender pay position ahead of disclosing, it is likely a number of organisations have identified equal pay issues among employees. These could be down to a whole host of reasons, which may include historic and inherited pay issues that continue to impact on employees’ current reward levels.
If pay disparities between these employees are not justifiable (for example, on the basis of relative performance or time in role), they will be in breach of equal pay laws. Employers should therefore ensure any action plan includes steps to identify and remediate non-demographic gaps as a priority. Such remedies are likely to include pay increases for those individuals for whom a gap cannot be justified.
Ed Stacey is head of legal services and employment law at PwC