Number crunching is difficult
If gender pay reporting was a film, it would be the closing scene of Butch Cassidy and the Sundance Kid: a prolonged and tense silence followed by a flurry of everyone firing at once. In the first 11 months of the year-long process, just 15 per cent of employers published their data, while more than 1,500 released their numbers in the final 24 hours and a further 1,500 failed to publish in time.
Cynics may suggest that this lateness was the result of organisations hoping to ‘bury’ their statistics in the stampede, but experts who consulted with firms on reporting told People Management that the mechanics of gathering data had proved far more complex than initially expected.
“When the idea of gender pay reporting was first put forwards, Equalities Office guidance estimated that it would take the average employer just a few hours to complete,” says Donna Sharp, director of employment legal services at KPMG. “In reality, the difficulty of obtaining and compiling accurate payroll data, and getting it to speak to HR data, was a far more complex process than many had anticipated.”
David Ellis, partner at EY, adds: “The biggest stumbling block was bad data. I don’t think the calculation itself was enormously challenging, but it quickly became so if you had multiple systems of pay in your organisations, and entities that were not as straightforward as you would like.”
Gender pay is not the same as equal pay
Difficulties over data were only exacerbated by a confused media dialogue that conflated gender pay and equal pay. The most high-profile example of this came in July 2017, when the BBC released a story about the salary brackets of its highest-paid onscreen stars. The news of its relatively small gender pay gap – 9.3 per cent – was lost in translation, as controversies raged over why Emily Maitlis earned less than £150,000 while co-host Evan Davis picked up as much as £299,999 a year.
“Both gender pay and equal pay deal with the disparity of pay that women receive in the workplace, but are two very different issues,” says Julie Dennis, head of diversity and inclusion at Acas. “Employers were largely aware of this, but the media played a role in failing to recognise the different causes and reinforcing those positions.”
Under the Equality Act 2010, men and women performing equal work must receive equal pay – to do otherwise is illegal. But the gender pay gap – an average across an entire company – has, most experts agree, a far more complicated set of causes, including the impact of women working part-time roles to balance caring responsibilities, unconscious stereotyping around a lack of female career goals and the overpopulation of men in the highest-paid sectors.
Crisis management matters
Reputational damage was a concern for many organisations, as reporting inevitably gave way to public reaction, with many employees taking to social media and newspapers to express their outrage. Inevitably, this was felt most keenly when staff had an existing public profile they could use to speak up; as BBC Radio 4 Today presenter Sarah Montague wrote in a Times column: “I felt incandescent with rage.”
For companies seeking to mitigate negative reactions to pay data, there are right and wrong steps, says Stephen Frost, principal at Frost Included and former head of D&I at KPMG. “Don’t try and manage or explain away your gender pay gap if you are getting a bad reaction – it’s a sure-fire road to more problems down the line. Recognise the problem, acknowledge the need for greater transparency and request the thoughts of your staff for achieving that transparency,” he says.
The data might be wonky
More than one in 10 businesses (14 per cent) reported a gender pay gap in favour of their female employees, while 8 per cent said they had no median pay gap at all – and 0.7 per cent reported having no mean pay gap.
“It’s possible for an organisation to have a median pay gap or bonus gap of zero, particularly if a large proportion of the workforce earns the same flat rate of pay or bonus – but the chances of a mean average gender pay gap of zero are far less likely,” says Sharp.
“Even with a homogenous workforce, any outlying group would shift the mean in the way it wouldn’t shift a median. If an employer employed 2,000 people earning £8.50 per hour, for example, and a small group of senior and back office staff who earn significantly more, it would be very unlikely that the mean would be zero, but the median may be. The percentage of employers that reported a mean pay or bonus gap of 0 per cent seems quite high.”
Some companies submitted their data more than once after scrutiny over their numbers, most notably men’s fashion label Hugo Boss, which revised its median gap three times in December 2017 – jumping from 0 per cent to 76.5 per cent, and then down again to 4.7 per cent. Deloitte and PwC also published revised data, after being accused of ‘exploiting a loophole’ in the reporting process by excluding their high-earning partners from the original figures on the grounds that they were not technically employees.
A strong D&I record does not mean a small gender pay gap
Some firms praised for their records on diversity and inclusion had particularly inequitable pay gaps. Research carried out by Frost found that among The Times’ Top 50 Employers For Women 2017, just three had a gender pay gap smaller than the national average.
“I see lots of companies running diversity programmes, schemes, awards and initiatives and events, and making lots of noise around diversity and inclusion, but the reality is that far fewer actually affect the decisions and the strategy of the company, as evidenced in gender pay,” Frost says.
Organisations on The Times’ list included law firm Linklaters (39 per cent), as well as EDF and RBS (36 per cent each). The Department for Transport’s pay gap was 22 per cent. Only one organisation on the list, Unilever, paid women more than men on average.
“If you wanted to be really cynical, you could argue that all the noise these organisations make around diversity hides a failure to tackle the systemic issues around decision-making and whether or not women are being paid fairly, and whether their company is a meritocracy with clear talent management systems in place,” Frost says.
What you should do next
Build your action plan
With the 2017 reporting over, businesses that are committed to closing their gender pay gap now have the opportunity to invest in positive actions for change – which begins with a clear action plan.
“Understanding the reasons for the gap are important for organisations that want to be agents of change,” says Jill Miller, diversity and inclusion adviser at the CIPD. “Developing the narrative around your figures and an action plan is really important, despite being optional, as your workforce data can be used as a starting point.”
An action plan will help companies establish the key identifiers of their gender pay gap, such as a lack of women in senior roles, and consider how to improve the landscape in the longer term.
“Scrutinise your language – it’s all very well to say ‘we have a lot of women’, but how often are they part of meetings? How is work allocated?” says Frost. “Forcing yourself to confront these difficult questions is one of the key ways change occurs, so organisations should turn their attention to systems work and embedding decisions in company choices, rather than relying on more of the same awards, programmes and PR to make a point about diversity and inclusion.”
Leadership from the top is crucial, Dennis adds: “There should be a clear commitment from the top of an organisation to ensure the plan is developed, actions are implemented, monitored and evaluated, and that line managers are trained to be a voice of this process.”
Invest in shared parental leave and flexible work
A key driver of the gender pay gap is the conflict between professional and caring responsibilities, as many women take time out of the labour market to look after family. Improving flexible working provision is therefore central to solving issues with a lack of women in senior roles – a report from the House of Commons women and equalities committee recently found that less than 10 per cent of ‘quality job vacancies’, paying the equivalent of more than £20,000 full time, are open to flexibility.
“We need to challenge the roles that flexible working is considered suitable for – we currently see flexibility far more in junior roles, and it is perceived as something that hampers women’s progression,” Miller says. “If employers fail to offer high-quality flexibility in senior roles, it’s not just disadvantaging women but disadvantaging the organisation, because it misses out on that talent.”
The idea that flexible working is only of interest to female employees is another stereotype that needs dispelling, Dennis says: “Organisations that encourage greater equality for parents in balancing working and caring are finding a better uptake of men taking shared parental leave.
“Taking a consistent approach to people requesting parental leave and assessing whether it can be accommodated by the business, rather than the reasons for the request, will return results. It’s just as important to develop schemes to support and encourage returners, and offer staff who are working part time the opportunity to increase their hours if their circumstances change.”
Tackle unconscious biases
Honestly confronting a gender pay gap also means tackling the thorny issues of bias – unconscious, and not so unconscious. Successive studies have demonstrated that women are more likely to be the victims of bias at work, a process that begins at the recruitment stage.
Take, for example, a 2012 study from Skidmore College in the US, where scientists were presented with identical CVs for a lab manager job, which differed only in the gender of the hypothetical applicant. Recruiters were more likely to rate male candidates higher on competence and hireability and offered them larger salaries. By contrast, female applicants were rated more likable but less hireable.
Employees of both genders consistently view women, on an unconscious level, as less committed and as less effective leaders. “We often see data that shows men getting higher performance ratings than women, which flows into reward and promotion decisions,” Sharp says. “It is unlikely to be the case that men always outperform women; therefore employers should look carefully at the input and output of their policies and their impact on pay and reward.”
Spotting and tackling bias in areas such as recruitment, promotion, talent management and reward is an important step in changing that, Frost advises.
“You need to analyse your systems from end to end, identify areas where bias occurs in recruitment, retention and reward, and de-bias them. Review CVs side by side instead of one by one; remove male language such as ‘hard hitting’ and ‘heavy lifting’ from job descriptions; make your processes objective. There are ways to re-engineer and redesign these systems to achieve a better outcome.”
Commit to transparency
At the heart of the gender pay debate is an unwillingness to openly discuss pay and progression. A 2017 survey carried out by Refinery29 of more than 3,000 women aged 25-34 found that only 7 per cent shared their salary details with colleagues.
Many HR professionals will now face requests for more specific information on salaries. While disclosing individual pay is an illegal use of protected information, Charles Cotton, the CIPD’s senior performance and reward adviser, says it should be possible to offer aggregate information to increase levels of transparency around the topic.
“Employees and potential workers are going to be curious as to how reward decisions are made, in terms of the process and the outcomes of that process,” he says. “At the moment, it tends to be leaders of big firms, councils and charities that have their pay details published. But companies should think about the structures they use to manage their talent, including pay.”
Salary bands, adds Cotton, are one key tool to increase transparency and provide a legal basis for pay decisions. But if an employee comes to HR wanting to know the salaries of their colleagues, it’s in many ways a sign that the organisation “has already failed” in its transparency goals, warns Duncan Brown, head of HR consultancy at the IES.
“On average, internal communications around gender pay have been particularly bad. A lot of employers didn’t start considering what to say to female staff until late in the game; now they must proactively educate people about why the gaps at their companies exist, the size of the gap and what they are going to do about it. It’s worth including PR and comms expertise in this communication if they have it in-house.”
Think long term
Gender pay reporting is now an annual process, but the majority of organisations are unlikely to see clear change achieved within the first 12 months. The trick will be to avoid falling into short-term habits to improve the numbers.
“Clear, consistent progress is going to be a challenge, particularly for smaller employers where data is more volatile, because this can be changed dramatically by people moving in and out of the workplace,” says Sharp.
“The pressure to improve gender pay on a year-by-year basis is good, but I would hate for it to become a box-ticking exercise instead of investing in the longer-term view for diversity generally, not just gender.”
Instead, experts urge employers and leaders to focus on longer-term diversity and inclusion gains, while engaging in an ongoing, two-way communication with their employees about the positive actions they are investing in. “Culture change takes years,” says Dennis, “but as a first step organisations should look at people policies to see how they can support narrowing gaps, and be ambitious in setting targets for the future.
“Remember that if you can implement change in an effective way, organisational engagement will increase, and more gender-diverse talent will be attracted to your place of work, which will reduce your pay gap. It could take a while, but don’t just stick with the status quo.”