The gender pay gap reporting exercise has been getting poor press. In February, the BBC said that of the 10 per cent of private sector employers who had submitted this year’s reports so far, four out of 10 had reported wider gaps than they did in 2018. But is the negativity premature, and is there scope to celebrate success?
First, bear in mind that we are looking at a very small subset of data. The BBC story relied on the reports of 1,146 companies out of a total of 10,539 that reported last year. Only when all the results are in will it be possible to draw any real conclusions on progress in closing the gap.
Then there are the positives behind the headlines. Although according to the BBC four out of 10 gaps have not improved, this means that 60 per cent of private sector employers’ pay gaps have either improved or stayed the same. In fact, the BBC also reported that, based on the second year’s reports so far, the average median pay gap is 8.4 per cent – an improvement on last year’s 9.7 per cent.
It is also early days. We are only in the second iteration, and the reporting regulations were never designed to be a quick fix. Even for employers who have been actively seeking to address their pay gaps, it is likely to take a few years before we can determine whether there is a consistent trend in their results. Some of the early results from this round also demonstrate how sensitive the results can be to one-off incidents, strengthening the case for a longer-term approach. For example, the departure of several senior female employees appears to have been enough to increase the median pay gap of a major car mechanics chain from -15.2 per cent (in favour of women) to +14 per cent (in favour of men).
More optimistically, the Government Equalities Office reports that 67 per cent of companies are having discussions at board level to identify how they can reduce disparity between male and female pay, which shows gender pay as an issue has moved up the ranks in terms of importance.
CMS has carried out a review of the second-round action plans and narratives published to date and found several trends emerging. Some employers are using their reports to focus on diversity outcomes, such as promoting flexible and part-time working, rather than discussing the gender pay gap in isolation. Others explain how they are using gender pay gap data to drive the desired gender pay gap outcome. For example, if the data reveals a discrepancy in one quartile, steps are being taken to encourage employees of the underrepresented sex into roles at that level.
Some reports set out the targets that have been set and highlight progress so far, while others explain the impact that processes and systems have had on their figures. These systems can throw up unexpected anomalies, such as a ‘loyalty penalty’ where women are promoted internally but external male candidates tend to be hired on a higher salary. The information available to date shows the range of approaches that employers can take, which proves that there is no easy solution to the gender pay gap problem.
There is undoubtedly more analysis to be done on reviewing trends and results once all the reports are in. However, the journey to transparency seems well and truly underway. The hope is that this transparency will prompt further discussion and allow employers to learn from each other, maybe leading to more positive stories in the third round of reporting.
Catriona Aldridge is a senior associate at CMS