There has been a stark trend towards greater transparency in business in recent years. In August, the Equality and Human Rights Commission formally recommended that the government legislate to mandate employers to address disability-related pay gaps in the same vein as the now well-established gender pay gap reporting obligation. This appears to be the latest push for greater accountability of social economic inequality within businesses.
Gender pay gap
Since April 2017, employers in Great Britain with more than 250 employees have been required to publish the mean and median average pay and bonus gaps between men and women, putting the pressure on the private and voluntary sectors, particularly larger and more high-profile businesses and entities, to soul search and think about the reasons for any detrimental pay gaps.
The results must be published on the employer's website and must, where applicable, be confirmed in a written statement by an appropriate person, such as the CEO. About 50 per cent of employers have opted to add a narrative to their reports explaining the reasons for any disparity and outlining any policy change being implemented to narrow the gap.
The next reporting deadline is 1 January 2020, which will be the third such reporting event. However, inaccurate figures and a lack of formal sanctions for failure to report have been seen as restraining the impact of such reporting.
Executive pay ratio
In relation to income disparity, the UK remains one of the most unequal countries in Europe. Beginning on or after 1 January 2019, listed companies with more than 250 employees are now required to publish the pay ratio between their CEO and the company's UK employees whose full-time equivalent remuneration ranks them at the 25th, 50th (median) and 75th percentiles.
As well as exposing pay inequality, CEO pay gap reporting is designed to address concerns that some CEOs’ pay may be out of proportion to a company’s performance, again giving light to more public scrutiny.
‘Family friendly’ policies
On 1 October 2018, the government announced plans to consult on the possibility of compelling employers with more than 250 employees to publish details of their family-friendly policies. Currently, employees have a number of fundamental family rights in the workplace, including the right to maternity leave, paternity leave, shared parental leave and adoption leave.
In 2015, the right to request flexible working was extended to all employees with 26 weeks’ qualifying service. All employees are also entitled to take a reasonable amount of time off work when necessary to care for certain dependants. The ambition of lobbyists campaigning for transparency for family-friendly policies is to make companies more competitive in their approach to policy-making in favour of the employee.
Ethnicity pay gap
The government is also considering extending mandatory pay reporting to capture any ethnicity-related pay differences, and a consultation on the matter closed in January this year. How to approach ethnicity pay reporting will be complex given contextual variables such as age, location and gender. The objective of such reporting is to expose any disparity and once again shame companies into dismantling any barriers to progression relating to an employee’s ethnicity.
Successive governments have both initiated action and been lobbied by public interest groups to raise corporate accountability with the hope that businesses force change both internally and externally. Those changes appear to have a momentum that is self-enforcing.
Pay disparity is now firmly in the public consciousness, which may be considered by some as a success in itself. However, it is still too early to tell whether the existing or proposed disclosures will really effect tangible social change and reduce income inequality or whether it is merely extra red tape for businesses to navigate.
Adam Penman is an employment lawyer at McGuireWoods