How does gender pay gap reporting affect businesses?

All organisations in the UK with more than 250 employees should now have published reports detailing the mean and median gender pay gap figures for their workforces, where men and women rank in the company’s pay structure, and the differences in any bonuses paid out during the past year.

This has not passed entirely without incident. Some organisations have published their top employees’ salaries for the first time, revealing vast differences in how people are paid for similar jobs.

The BBC has come under particular scrutiny for the gender pay gap between its TV and radio hosts, with news anchor Carrie Gracie resigning from a top post in protest over her salary. Most organisations however seem to have received little coverage, and the issue has now faded somewhat into the background.

To what extent, then, is gender pay gap reporting a failed experiment? Has it made a tangible difference to date, and is it likely to change things for the better in the long term? And what impact is the law likely to have on businesses, both at present and in the future?

How does gender pay gap reporting work?

Fundamentally, the reporting of gender pay gaps works by highlighting the total discrepancy in salaries between all male and female staff within an organisation. The provision of both mean and median salaries will reflect both the difference in the true ‘average’ salary at the company, as well as any gender imbalance in the provision of the highest salaries.

The objective is in essence to shine a light on differences in salaries that might otherwise go unreported, as employees very often do not know what their co-workers are earning. Revealing this information should encourage employees to demand greater salary parity, and ‘shame’ larger companies into working more concertedly towards equal pay for employees in similar roles.

The most obvious effect this can have on businesses is the short term pain of paying higher wages to achieve parity. Many companies will have found themselves under pressure to raise women’s salaries to match men’s salaries in similar or identical roles.

Although this could be viewed as a problem of their own making, it could be seen in a ‘free market’ economy as an unfair imposition, with some people believing that raises should be earned through negotiation as well as objective performance.

However, when businesses take public action to rectify these issues – or benefit from the publicity of a small or nonexistent pay gap – this can also bring with it a PR boost that can attract more candidates to work at that company. This could potentially improve the overall gender balance of a company — and a diverse business has been widely proven to be a more successful one.

How successful has gender pay gap reporting been?

The filing of gender pay gap reports has certainly not flattered UK businesses. Just 8% of reports indicated that there was no gender pay gap, with a national average median pay gap of 18.4%, and almost a third of all UK companies exceeding that figure. The biggest gaps were reported in the financial and construction industries, which are typically seen as male dominated.

While there is some discrepancy between salaries in similar roles, however (and many theories as to why this is), the biggest differences highlighted so far have been between the roles men and women occupy. One example is Easyjet, who claim their large pay gap is down to the fact that the majority of qualified pilots are male, while the majority of cabin crew are female. According to EasyJet, these roles have a large pay discrepancy due to the amount of training required to qualify for them.

Other industries, such as construction and technology, face similar problems. 71% of Apple’s top earning employees are male, but Apple claims that this is because of a dearth of female talent in the STEM (science, tech, engineering and maths) fields. It is a similar story in the construction industry, where only 13% of employees in the UK are female, a number that has remained static into 2018.

This does not invalidate the concept of gender pay gap reporting, however. In many cases, the reporting requirement will shed light on genuine differences in pay for similar roles that ought not to exist. In the case of pay gaps arising from cultural or sociological differences, a public conversation can be had on why high paying careers seem to be more male oriented.

What are the long term benefits of gender pay gap reporting?

The obvious, immediate benefit of gender pay gap reporting is redressing pay gaps between men and women in similar or identical roles. These can arise due to biases on the part of managers and employers, the reticence of female employees to ask for a raise, and unfavourable pathways for requesting and encouraging raises and promotions. Unequal pay for similar work has been illegal since the 1970s in Britain, and is currently enshrined in the Equality Act 2010.

Though many theories have been put forward, there is no fundamental, scientific reason why women should not be equally capable pilots, engineers, construction workers or applicants to almost any other male-dominated position. The imbalance in female executives – only 24% of senior roles worldwide are occupied by women, and 25% of businesses have no female executives – also cannot be explained away easily, given the higher proportion of women in business management roles.

What gender pay gap reporting highlights, then, is a need to address the pathways for young women towards a greater variety of roles in the workforce, and particularly how businesses promote talent and distribute pay at all levels.

Businesses with significant pay gaps need to look not just at what they are paying existing female employees, but also the mechanisms for judging salary in relation to performance, how female applicants are hired, and what they can do to nurture female talent within their industry.

What can my business do about the gender pay gap?

Addressing short-term changes, such as changing hiring policies and looking to promote more female talent, should provide a  PR boost that will facilitate more long-term gains. Making your business an attractive place for female employees to work and climb the ladder should encourage more female applicants, creating a more diverse workforce.

The monetary boost this will provide your business in the long term could be reinvested in overturning stereotypes around certain roles, through actions such as engaging with local schools, sponsoring courses and highlighting the work of women in your business through various media channels.

Other factors at work

There are other issues that can prevent women from climbing the career ladder, too. Inadequate policies around maternity leave are often cited, with some companies still being reticent about hiring female employees in certain positions in case they leave to have a child.

The support networks available to women after giving birth and returning to work can also be inadequate, and the time off can negatively impact on their career progress. Implicit or unconscious biases can also affect opinions of women in the workplace, and penalise women for the same actions that are often praised in male candidates, such as being a vocal presence in meetings or making a passionate argument.

For some businesses, a gender pay gap may not be a conscious decision, but a result of an outdated or inefficient employment structure. For example, a pay gap may be the result of the highest paying jobs having a majority male talent pool.

In these situations, it may be worth investing in specialist legal advice and specifically in policies regarding discrimination. Employment law for employers can be a tricky field to navigate and turning to experts can be a more efficient way of combating any discriminatory employment systems.

Unconscious bias training has become a popular remedy for these kinds of attitudes, and can be helpful in uncovering them. Yet the roadblocks women face in achieving job and pay parity are less about individual cases of sexism, and more about the systems that encourage these attitudes.

Changes to help women progress and flourish in your workplace should focus on your recruitment process, and the channels that allow talented individuals to climb the ladder. Change the system, and your employees should change with it.

Pam Loch is the managing director and founder of Loch Associates Group, a law firm specialising in employment law, HR services and health and safety. Pam has years of experience working with people in this industry and regularly appears on TV and Radio commentary on HR developments.