Gender pay gap rules are showing how transparency can play a critical role in encouraging change. 2019 is the second year of reporting and progress is judged not simply by comparing numbers but by genuine signs of action. Reducing the pay disparity is a requisite goal for employers, who in time may otherwise find it more difficult to attract the best talent, win new business and appeal to investors. Are you tackling the challenge and closing in on the gap?

GENDER PAY GAP

Telling figures Almost eight in ten companies and public sector bodies pay men on average more than women, as revealed by figures from the 10,000+ companies who reported their gender pay gap last year. Only one in ten companies had a pay gap in favour of women.

Since then, business surveys show that despite initial reservations, four out of five employers are supportive of the gender pay gap reporting rules and more businesses are taking action.

With just a few weeks before the 2019 deadline for the second year of reporting, the signs are that the median gap has narrowed only very slightly. The chances are this might have happened anyway, given the downward trend over recent years. But with progress comes greater momentum.

More companies are opting to give a narrative to explain the context behind their pay gaps. However, most still lack detail on the steps being taken and how outcomes will be measured. Some of the common errors noted last year persist, such as reports not being signed by the correct person or stating equal numbers of women in the four pay quartiles which statistically is highly unlikely.

Gender pay gap realismIt is undoubtedly positive to publish an ever-narrowing gap. But in many cases, the numbers are not going to be better this year as most of the issues driving pay gaps require a longer term view. The government itself has said this is a five-year challenge – as have other countries like Denmark who started mandatory reporting earlier and are now seeing a positive impact.

While equal pay law provides a remedy to women receiving unequal pay, most of the societal and historical causes of the pay gap are not unlawful. The issues, such as male-orientated workplace cultures and stereotypical female lower-paid roles, are hard to shift.

Positive steps taken by organisations to tackle gender inequality – be that hiring and promoting more women, or offering more senior part-time roles – will take time to impact on their pay gap.

Groundbreaking legislation that required companies to reveal their gender pay gap for the first time was big news, accentuated by the #MeToo and Time’s Up movements. The gender pay gap is at its lowest level on record, but this is widely seen as not good enough if real gender equality in the workplace is to be achieved. Employers are under increased pressure to narrow the gap as a business imperative.

For example, measures designed to change a company’s gender make up in long term could make the gap worse in the short term, such as recruiting more young women at entry level. For some, the departure of a single senior woman could have a big impact. In others, a restructure or merger could tilt the results.

Reasons to mind the gapThere is no reason for complacency – and no silver bullet. Companies that are serious about closing their pay gap will be doing more than just tinkering around the edges. It requires an understanding of the causes and determined action to close it for good.

The Equalities and Human Rights Commission has powers to enforce the rules and last year worked with failing companies to correct errors and achieve 100% compliance. A report on strengthening its enforcement is due soon.

Right now, businesses should be focused on the benefits of demonstrating a culture of integrity, transparency and inclusivity for everyone.

Scrutiny around addressing inequality and eroding historical imbalances is set to increase, as shown by the government’s consultation on ethnicity pay gap reporting and the intensified debate around sexual harassment. As awareness grows, so will the need for employer credibility to withstand discrimination challenges.

Perceptions of pay equity increasingly affect brand image and the ability to attract, retain and drive employee engagement. There is also the issue of demographics and skills, compounded by Brexit, where businesses need to work hard to broaden their appeal to a diverse workforce.

The conversation is moving on: from justifying the reasons for a gap in earnings, to talking about what is being done to reduce it, and before too long to show how it’s been closed.

Update on closing the gap

Five steps to closing your gender pay gapTackling the gender pay gap makes good business sense. Now is the time to review and refine what you are doing to make a positive change.

1 Follow the rules and double-check Data errors and late reporting show that working out what’s required can be a challenge for some businesses. If you are newly covered by the regulations, check that you

understand what you need to do to gather the data and publish for the first time. After that, applying your previous knowledge should make complying increasingly straightforward. High quality data helps to identify causes to target effective actions. Think it could be easier or more accurate next time? Now is the chance to re-evaluate what you’re doing and perhaps involve someone new in helping you to embed the best processes.

2 Be transparent and proactive Gender pay gap reports must be published on a website accessible to employees and the public for at least three years. Not doing this is a common error amongst businesses

failing to comply. For the majority who are compliant, there’s been a tendency to use the supporting narrative to explain the gap and communicate an intention to narrow it. But simply highlighting the gap is not enough. Employers now need to put their commitment to reduce it into practice and show progress.

Use your report’s narrative to tell your story. Make it clear, honest and impactful. Present your business in a positive way, as an employer, supplier and customer, and avoid making promises you can’t keep.

3 Analyse and engage Being open about gender pay is a good start, but barriers to progress remain. Most employers will continue to have a gap for a while. The key is to diagnose exactly what is

driving it. So involve your people in talking; not just about data, but what lies behind it and what can be done to improve. For example, how does gender composition affect certain grades? What are the blockages to promotion? Do men and women tend to record different performance scores? What actions would make headway faster?

Considering every stage from recruitment to exit interviews will help identify barriers. Engage through working groups, informal feedback sessions and surveys. Examine best practice elsewhere. This is about inclusivity for everyone, so keep the conversation going. The more people you involve, the greater insight and support you will have.

4 Take action Taking action to close the gap means embracing the true spirit of gender pay reporting. For change to be meaningful, actions need to be based on your analysis of the divide and

confront the underlying causes.

Start small with achievable steps. Actions proven to have a positive impact include being open about pay and promotion processes, having multiple female candidates in shortlists, and appointing a diversity champion. Overarching goals like ‘reducing our gender pay gap to attract and retain the best talent’ can set the scene for developing an inclusive culture. But you’ll need specific and realistic targets to make and track progress: what change will be achieved by when and how will you measure it?

5 Monitor and updateReducing the gender pay gap is a long game. Make it an ongoing priority, where your action plan is an iterative process of evaluation and adjustment. Setting specific, time-

bound targets and appointing a named individual to drive the plan forward can help. Be clear with colleagues you expect your plans to develop over time. Actions to close the gap need to become part of your ‘business as usual’ activity, demonstrating your commitment and reducing any perceived burden on staff. So make links to wider diversity and training initiatives and to existing review processes, such as having your leadership team report on progress quarterly.

@SHMALaw

Shakespeare Martineau

03300 240 333

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Helen is an experienced employment lawyer, with extensive knowledge gained in both the private and public sector. She takes a commercial and common sense approach to resolving HR matters, with a particular focus on regulatory compliance and giving support to in-house teams to proactively manage gender pay and other equality issues.

Helen HughesLegal Director

01789 416 495helen.hughes@shma.co.uk

Each year, employers with 250 employees or more are required to report their mean and median gender pay gaps, bonus pay gaps and the proportion of men and women in each pay quartile and receiving a bonus.

As stock is taken of the second year of mandatory reporting, now is the time to strengthen the quantifiable steps needed to close the gap, drive greater transparency and protect your reputation.

One size does not fit all. Employers will be at various stages of creating a more diverse and inclusive workforce, benefiting from a wider range of skills and higher employee satisfaction and retention.

Every business will need to take account of their competitive market, organisational structures and cultural preparedness in deciding what is right for them.

Be aware of being caught out if you focus on the wrong areas. You should concentrate on the way ahead to make changes which will create a real difference.

That’s where we come in. Our experienced team can guide you through all aspects of gender pay issues, including clearing the way to easier data collection, training for managers, and supporting you to identify the reasons for any gender pay gap and to deliver the actions to narrow it.

We’re here to help you with the implications of this culture-shifting law – and other changes that may accompany it.