MPs want tougher requirements on gender, ethnicity and executive pay reporting

15 Jan 2019 By Maggie Baska

Experts call on organisations to publish narratives to help close the gap or ‘risk reputational damage by doing nothing’

More than two-thirds (69 per cent) of MPs believe reporting requirements on gender, ethnicity and executive pay are a “good start” but feel “much more needs to be done”, according to a new survey. 

A YouGov poll, commissioned by the Association of Accounting Technicians (AAT), revealed almost a quarter (23 per cent) of parliamentarians strongly agreed with this sentiment, while a further 46 per cent agreed.

Only 13 per cent either disagreed or strongly disagreed. 

Gender pay gap reporting requirements were introduced by the government In 2017, and oblige all employers with more than 250 employees to publish figures comparing men and women’s hourly and bonus pay across the organisation. Figures from the first round of reporting in 2018 revealed a majority (78 per cent) of organisations have a pay gap in favour of men.

Phil Hall, the AAT’s head of public affairs and public policy, said it was “good to know” MPs now accepted the rationale for gender, ethnicity and executive pay reporting, but warned that “recognising the problem and dealing with it are two very different matters.”

“We need to see anomalies, loopholes and unintended consequences dealt with and a wider recognition that simply reporting on a problem, while helping to shine a light on issues, is very different from resolving those issues,” Hall said. 

Last year, MPs called on the government to require organisations to publish a narrative explaining their gender pay gap data and include details of the progress they are making. The current regulations do not require organisations to publish any accompanying explanation or action plan.

Charles Cotton, CIPD senior performance and reward adviser, told People Management he hoped more organisations would produce a gender pay gap narrative for both internal and external purposes.  

“Not all organisations that submitted their figures [last year] took the opportunity to create a narrative or action plan,” Cotton said. “It’s still early days so far, but hopefully we should see more organisations include a narrative explaining the things they plan to do to reduce the gap.”

Anna Ritchie Allan, executive director of campaign group Close the Gap, said pay transparency was an “important first step”, but didn’t go far enough. “Employers aren’t required to take action that will close their pay gap,” she said. 

“Employers have to identify why they’ve got a pay gap, and then take positive steps to address the problem. The challenge for employers is to decide whether to be industry leaders and demonstrate their commitment to gender equality, or to risk reputational damage by doing nothing.”

Like gender pay reporting, the government is expected to soon require organisations with more than 250 employees to report their ethnicity pay gap data. The government consultation on the potential requirements closed last week (11 January), and further detail is expected soon. 

In its response to the consultation, the CIPD recommended ethnicity pay reporting be based on the same pay quartiles that were used for gender pay reporting and include a pay gap figure “comparing average hourly earning of ethnic minority employees as a percentage of white employees”. 

It also recommended the classifications for ethnicity that companies use for reporting should be based on the upcoming 2021 census or, failing that, the most recent census. 

A recent Equality and Human Rights Commission (EHRC) report revealed more than half (51 per cent) of employers felt they faced barriers when it came to collecting ethnicity data, meaning they would face problems calculating their pay gap data. 

The CIPD said organisations “should be required to produce a narrative and action plan”, and must report on the results of the action plan. It recommended the government produce guidance for employers on how to construct a narrative.

Earlier this month, new regulations came into effect requiring companies to report their executive pay ratio – the difference between the pay of the chief executive and the median  of its employee. Calculations published by the CIPD and the High Pay Centre suggested that pay accrued by leading chief executives passed the median UK gross annual salary of £28,758 for full-time employees by the end of 4 January.

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