Addressing the gender pay gap
New legal disclosure requirements will force companies employing more than 250 people to reveal their gender pay gaps using four different metrics
On 8 March, also known as International Women’s Day, women in more than 50 countries downed tools to take part in a strike protesting against the social and political barriers to women’s equality, from the US Presidency of Donald Trump to the equally insidious issue of the gender pay gap.
The strike follows a similar movement in France last year, which saw women across the country leave their offices at 4.34pm on 7 November – the time at which the average French woman stopped being paid for her efforts in comparison to men.
A month earlier still, in October 2016, women in Iceland walked out of their offices to protest their pay differential, which translates as women working for free from 2.38pm in every eight hour day. And yet, despite such protest, recent research found that nearly a third of British employers still do not believe that the gender pay gap is an issue, according to a survey by NGA Human Resources.
Unfortunately for those bosses, their outlook may very well change come 2018, when all companies with more than 250 employees will be required by law to publish the details of the pay gap between men and women, as part of the Government’s aim to end the difference between salaries of both genders.
Employers will be required to publish the following four types of figures annually on their own website and on a Government website:
- Gender pay gap (mean and median averages)
- Gender bonus gap (mean and median averages)
- Proportion of men and women receiving bonuses
- Proportion of men and women in each quartile of the organisation’s pay structure
It is expected that the new figures will draw a lot of attention from the press, as well as company stakeholders, from investors to employees.
‘Remuneration always get picked up so it will get attention,’ says Stephen Butler, corporate reporting and investor communications director at Luminous. ‘There will be a lot of press attention because it’ll be held on the website and on the government’s website so it’ll be easy to find.’
‘The figures have to be published on the company’s website,’ explains Clive Bidwell, strategy director at Friend Studio. ‘That will raise a number of questions for all stakeholders, regarding the scale of the gap and, more importantly, what each organisation is doing to address it.’
What companies are doing to address the gender pay gap will likely carry more weight than the salary data itself. It is important, therefore, that companies use the new legislation as an opportunity to provide a narrative.
‘The point is that companies need to address [the gender pay gap] and describe how they are tackling it,’ says Bidwell. ‘There may be extenuating circumstances in some industries, such as oil and gas or construction, where perhaps the pipeline of talent is predominantly male, but that should be explained – what initiatives are a company introducing to address it, such as graduate schemes and agile working?’
Butler agrees. ‘In areas where women are under-represented, such as oil and gas and the financial industries, they need to look at why this is the case. They need to look at the statistics. Men and women up to 30 only have about a two per cent gap. When women leave to have children, the gap widens massively. That’s where the battle needs to be fought.
‘Companies need to be transparent about salary and review it yearly, not just giving pay rises to people who ask, typically men. They need to think about flexible working, basic things like KIT [Keeping In Touch] Days.’
They need to look at the statistics. Men and women up to 30 only have about a two per cent gap. When women leave to have children, the gap widens massively. That’s where the battle needs to be fought
KIT days provide touchpoints for employees who are off on paternity or maternity leave, allowing them to work for up to ten days during their leave without bringing it, or their maternity pay, to an end. This ensures that employees are kept in the loop and abreast of any changes in the workplace whilst they are off.
‘There’s a lot to do around unconscious bias, making sure people don’t just hire people that are like them, that’s a big challenge in business,’ continues Butler. ‘Companies need to address the skills gap: it’s all having a tangible impact. If you’re not getting this right, the reputational impact can be vast, especially with millennials, who want to work for companies where they feel valued and equal.’
Both Bidwell and Butler note that, initially at least, the new legislation is unlikely to affect printed annual reports, as it is not a legal requirement to include it in those.
However, companies that do consider including the data in their printed reports could be seen as demonstrating more commitment to the issue than those that don’t.
‘It’s not just about ticking a box and being compliant. It’s advisable that companies do present it in their reports because it is important to stakeholders,’ says Bidwell. ‘It is an advantage being transparent and open and showing a commitment to addressing [the gap], instead of publishing the figures last minute on the website. It’s a colossal issue and it does need to be addressed.
‘Put it on your website and be clear about the story or you might be seen as less transparent. Companies are under pressure to reduce the scale of their reports but it may seem like an omission if you don’t include it.’ Sallie Pilot, director of research and strategy at communications consultancy Black Sun agrees. ‘While companies will only be required to disclose information on their gender pay gap online, we believe companies should take the opportunity to leverage the information collected in their annual report to help tell their more complete story. The annual report is a stakeholder engagement document which provides companies with an opportunity to explain how they create value for all their stakeholders.’
Some companies are already ahead of the curve, reporting ahead of the Government’s given disclosure date of April next year, but they are in the minority. Just 19 out of 90 FTSE 100 companies who have published their annual report at the time of writing make some reference to the gender pay gap in their report, according to research from communications consultancy Black Sun. Of those 19, only four provide data to describe the gap, accompanying the figures with some explanatory context.
One of the four is asset management company Schroders, which details the measures it is taking to close the gender pay gap, from ensuring entry level assessment centres are gender balanced to offering internal and external mentoring programmes to encourage diversity.
However, Black Sun’s research, which is due to be released in late June, highlights airline EasyJet for providing the most insightful explanation of the measures it is taking to combat the gender pay gap. ‘Its report explains that whilst EasyJet salaries for equivalent roles are broadly equal across genders, the overall picture is influenced by the fact that pilots, who are predominantly male, receive higher salaries than the cabin crew, the majority of whom are female,’ explains Pilot. ‘The report then provides a clear explanation of the steps the company is taking to meet its target of increasing the proportion of EasyJet female pilot cadets to 20 per cent by 2020.’
She continues: ‘The first step is really about complying with the Government’s new measure of gender pay gap reporting, and so, for companies that are complying, that is a step in the right direction. How organisations talk about the gender pay gap is evolving, along with the wider discussions of diversity issues. Communications surrounding the subject is an opportunity for organisations to articulate how they are addressing the issues in a transparent way.’
Reporting the gender pay gap will be no mean feat as both Bidwell and Butler are clear that firms that don’t get it right will face reputational issues. ‘There are real risks for businesses not reporting in that area, not only reputationally, but also in terms of recruitment, especially in context of Brexit, where we’ve closed off a big part of our talent pool,’ explains Butler.
‘Companies that aren’t particularly transparent need to be aware of the consequences of not getting it right,’ says Bidwell. ‘It exposes them in a very black and white way.’
The big question, however, is whether the new legislation is likely to change anything. Bidwell believes so. ‘If stakeholders are encouraged by what Schroders is doing, over time it will reduce the pay gap,’ he says. ‘It has parallels with the original move to improve gender diversity on boards. By highlighting the gaps, organisations will have to instigate measures and the consequences of not doing that will be reputational.’
Communications surrounding the subject is an opportunity for organisations to articulate how they are addressing the issues in a transparent way
Bidwell also points to Legal & General Investment Management, Britain’s largest asset manager, which has pledged to vote against directors of US companies that fail to appoint women to the board, whilst Butler concurs, saying that boards need to get actively involved by putting pressure on the executive committee to activate change.
‘From a stakeholder communications perspective, the dialogue that is opening up around culture and diversity issues is really about an evolution in corporate governance discussions,’ says Pilot. ‘We’ve seen and heard quite a bit of information in the past year within the realm of culture and was reflected in the Financial Reporting Council’s report last July, Corporate Culture and the role of boards.
The report looked at the ‘increasing importance which corporate culture plays in delivering long-term business and economic success,’ focusing on board’s role in ‘shaping, monitoring and overseeing culture’.
‘This has really evolved conversations around these types of issues that are related to corporate culture, and issues being discussed in the boardroom,’ Pilot asserts. ‘The gender pay gap reporting regulation is part of this boardroom evolution in raising awareness and bringing the conversation to the forefront in order to take a wider stakeholder view. From our experience of working with companies, regulation helps to often start a conversation internally about an issue, but all these things need to be viewed in the larger spirit or they become merely tick box issues.
‘Discussion needs to move to the business rationale for doing things; how all these initiatives together can move the dial on diversity, which is about effectiveness not fairness, about making companies better run, management teams making better decisions and boards delivering better performance.’
It is clear that the gender pay gap is a big issue for companies then, from board level right down to the employees it affects, and the new legislation is ripe at a time where women across the world are marching for their rights.
Women won’t work for free anymore; it is time for companies to get on board.