Innes Miller is a Director at Staffmetrix who offer a powerful and intuitive data visualisation platform which brings transparency and accountability to the workplace. Innes will be speaking at the Gender Pay Gap – Moving Forward Conference on the 22nd May in London.
Gender pay gap reporting has been one of the most hotly discussed topics in the media, at work and among the general public in the last 12 months. While the level of interest has been high, questions remain on how successful it’s been.
According to the government’s Gender Pay Gap service, 10,585 organisations have reported – 1,686 from the public sector and 8,899 private sector organisations. An estimated 1,500 organisations did not report. Each subsequently received a letter from the European Human Rights Commission (EHRC) asking them to do so. Around 450 have since reported, or confirmed they do not come under the regulations.
EHRC has said that it will go after 100% of organisations not to have reported, using powers under the section 20 of the Equality Act 2006. Their investigations will being in June with a report on their findings being published later in the year.
Based on the data submitted, the overall median gender pay gap was 9.3%. Comparing this to the ONS Annual Hours of Hourly Earnings (2017), their estimated median gender pay gap for full and part-time employees was 18.4% (from 18.2% in 2016). Looking at individual sectors using gov.uk data, construction had the highest median pay gap of 24.8%, followed by financial services (22.2%) and education (19.6%). Financial services had the highest median bonus gap (35.3%).
While extensive media reporting applied pressure and encouraged organisations to respond, the sensationalist approach in some publications led to confusion, not least with equal pay. ‘Chatter’ among employees on internal and external channels was a source of concern for many employers. By not producing a clear narrative explaining their position, management open themselves to ambiguity and risk. The culture of an organisation can be laid bare, with unintended consequences.
Employees should be made aware that the gender pay gap reporting data is taken from a point in time and relates to a specific period in the year – not the full year. A different snapshot would likely yield a different result, for better or worse.
Where the metrics don’t read well, employee morale may be impacted leading to a fall in productivity (if only temporary), or employees may consider leaving if they believe their employer does not offer them the best chance of career progression. Prospective employees are increasingly taking the gender pay gap into consideration when deciding who to work for and customers in some cases may decide not to buy from a brand with a pay gap they consider to be unacceptable.
Investors are also paying attention. Earlier this month, shareholders and employees questioned HSBC management at their AGM on how they plan to improve gender and ethnic diversity in senior management. The bank has committed to a target of increasing the ratio of women in senior management roles to 30 percent by 2020, from 26.5 percent today.
Legal & General announced that it will vote against the chairs of FTSE 350 companies at annual meetings in 2018, if their boards are not at least 25 per cent female. The Investment Association has written to 35 FTSE 350 companies asking them to explain their poor female representation at a leadership level.
Pension funds are demanding change. They recognise that diversity of thought and experience reduces risk and boosts performance. Research by Credit Suisse in 2016 (Gender 3000: Progress in the Boardroom) found that diversity improves corporate returns by 3.5 per cent.
Organisations should invest the time and effort to produce a gender pay gap report that articulates their current position and future plans. We have seen a number of gender pay gap reports that fail to adequately explain the ‘reasons why’.
Gender pay gap reports, no matter how poorly the metrics read, should be seen as an opportunity to explain how the organisation is planning to tackle its gap, by setting out its intentions that could be broadened to include a wider diversity and inclusion agenda.
In recognition of where the legislation will go, we are working with organisations to broaden their reports on gender pay gap reporting to include ethnicity. These organisations are preparing for the future with efforts being made to also collect workforce data on disability and social mobility within the context of GDPR. They are keen to show that they are forward thinking with a strong social purpose. They understand that it adds value to their brand, and improves stakeholder engagement.
However, while many believe gender pay gap reporting is a positive step, some think it’s flawed. Julian Jessop from the Institute of Economic Affairs (IEA) believes the legislation isn’t even fit for purpose with the biggest issue being that the data in almost every case seems to show evidence of unfairness in pay.
His colleague Kate Andrews (IEA News Editor) went one step further to say that the gender pay gap methodology was “crude” and rendered the results “meaningless” for a number of reasons. These included not distinguishing between full-time and part-time workers, excluding details on comparable work being undertaken by men and women and that some data was missing.
So where does this leave the value and importance of gender pay gap reporting? Crucially, gender pay reporting has brought to the fore gender balance issues that many of us know exist but fail to acknowledge. It has started a conversation and highlighted the need for change – not least around what more can be done to support the career progression of women.
The reporting methodology may be flawed, but is a first step. The government is easing organisations into a reporting process that will over time evolve to include data that provides a more accurate assessment of diversity performance. Ethnicity, disability and social mobility may also be added. Some leadership teams may find the reporting requirements uncomfortable but they must respond to the challenge and strive to create transparent, fair organisations that are attractive to work in, invest in and buy from.
Innes Miller is a Director at Staffmetrix and will be speaking and expanding on these insights and solutions at the Gender Pay Gap – Moving Forward Conference on the 22nd May in London.