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Gender pay gap: focus should be on long-term improvements

ANALYSIS: UK businesses need to focus their efforts on producing sustained improvements to the gender pay gap (GPG) over the long term, rather than placing too much emphasis on annual figures.18 Apr 2019

Analysis of the second annual submission of GPG data by Pinsent Masons, the law firm behind Out-Law.com, showed that most businesses had seen only a marginal shift in their GPG figures since last year.

This is not surprising, as the GPG regulations were never intended to produce a quick fix. They are designed to promote sustained and positive change over the long term. For this reason, organisations should not be fixating over their headline figures but should be focusing on implementing long-term targeted action plans, which in some cases could lead to higher GPGs in the short term.

Overview of the 2018 GPG data

The gender pay gap reporting regulations require employers in Great Britain with 250 or more employees to publish their overall mean and median pay gaps based on gross hourly pay for men and women, expressed as a percentage; as well as their mean and median gender bonus gaps.

These employers are also required to publish the proportion of male and female employees within each quartile of their pay distribution, ordered from lowest to highest pay, as well as the proportion of both men and women that have been paid a bonus in the preceding 12-month period.

GPG data must be reported annually. The latest reporting cycle captured employers' GPG position as at 5 April 2018 with a reporting deadline of 4 April 2019.

More than 10,500 employers have submitted their data in the latest reporting cycle.  The results show that 78% of female employees are working for companies that pay them on average less than their male counterparts, although the overall median pay gap was 9.6%, down 0.1% from the pay gap reported in 2018.

A total of 8% of companies, including high street brands such as Costa, Starbucks, KFC and Sports Direct reported no GPG between men and women15% of companies reported paying women more than men.

In seven out of the 19 sectors in which employers have reported, men are earning at least 10% more than women and in 27% of companies and public sector bodies there is a pay gap of over 20% in favour of men.

Sectors with the biggest GPGs include construction, where the median GPG is 24%, finance and insurance (23%), and education (20%), while companies in the health, accommodation and food services, and household employer sectors typically report relatively small GPGs. In the accommodation and food services sector, for example, the median GPG is just 1% in favour of men because companies in this sector often apply a flat rate of pay to most roles. 

Changes seen from last year

Our analysis has found that 48% of firms lowered their pay gap compared to last year, with 7% reporting no change and 45% reporting an increase in the gap.

Some employers saw big improvements in their figures. Mitie, for example, reduced their GPG to 5% compared to a gap of 31.4% in 2017. In comparison, Kwik Fit reported one of the largest increases going from a gap of 15.2% in favour of women last year to 14% in favour of men. Kwik-Fit explained that the shift was linked to them losing a number of senior female employees.

Organisations with the biggest GPGs include Countrywide Services, with a median GPG of 60.6%, down from 63.4% last year and EasyJet whose median GPG of 45.5% from 2017 increased to 47.9%. EasyJet put this increase down to the recruitment of more female cabin crew over the last year. Ryanair, which had one of the worst gender pay gaps last year at 71.8%, lowered their GPG to 64.4% in the latest reporting cycle.

The finance sector was one of the worst performers last year and the gap has been widening for some employers, while in the construction sector the average hourly rate for women at the top 40 contractors is 28% less than for men.

Going beyond 'tick box' compliance

Alongside publishing the raw GPG data, employers have been encouraged to publish a narrative to contextualise their data.  For this reason, it has been common for some companies to choose to disclose extra information that goes beyond the requirements of the regulations.

In the latest reporting cycle a number of companies chose to voluntarily report their ethnicity pay gaps, whilst some went a step further to report their sexual orientation and disability pay gaps.

Pinsent Masons, the Bank of England, Deloitte, ITN and KPMG are among the employers that published their ethnicity pay gap. Draft regulations in relation to ethnicity pay gap reporting are expected later this year, following a consultation in late 2018. Companies need to be constantly challenging themselves to see what’s on the horizon and how they can keep pace of change.

Other examples of proactive reporting include employers breaking down the gender make up of their organisation overall, including at board level, describing the actions they are doing to reduce their pay gap, admitting to the structural issues that have led to a gender imbalance and publicly setting targets for female representation.

In addition, 446 employers with less than 250 employees have voluntarily chosen to report their GPG, despite not being legally obliged to do so.

Many of the big accountancy firms and law firms have, like Pinsent Masons, published their partner pay gaps and pay gaps including partner pay. The move follows concerns expressed by a number of individuals in business and government that, in following government guidelines, which prohibit the inclusion of partner data in GPG reporting, partnerships have distorted the true nature of their gender pay gap. 

In financial services, more than 330 firms have signed up to the Women in Finance charter, introduced by the Treasury, and pledged to increase the proportion of women in senior management.

Some employers also chose to confirm that they have undertaken an equal pay review and that they are satisfied that the gap is not indicative of an equal pay issue. This helps to educate the workforce and discourage equal pay challenges.

Focusing on the long-term

The data reported this year masks some good work being carried out to combat the GPG because, in some cases, the GPG which employers report will grow in the short-term as a result of efforts to reduce the gap in the longer term.

We have seen that some companies which have introduced initiatives to encourage more women into entry-level roles have reported higher gaps this year because these initiatives have resulted in them having more female employees in lower-paid roles during this reporting cycle. However, these companies now benefit from a strong pipeline of female talent; women who will hopefully progress through the ranks and become future leaders.

Diversity and inclusion expert Stuart Affleck of Brook Graham, which is owned by Pinsent Masons, said: "Companies need to understand the reasons for the GPG data and then focus on short, medium, and long-term actions to invest in and develop their current and future talent pipelines. The benefits and rewards of a balanced workforce at the individual, team, and organisational levels have been well proven, and the increases in productivity and profitability are there for the taking, especially for those companies that are looking to deliver long term cultural change as a way of closing their GPGs."

Companies continued to cite the lack of female representation in more senior positions, as well as historic trends, societal issues and the lack of women in certain sectors or industries as reasons for their GPGs.

Given these deep rooted, underlying challenges, it is clear that closing the GPG altogether is going to take years and many have questioned whether annual reporting will actually help close the gap or will simply become a box-ticking exercise. Given that the reporting requirement has attracted such significant media interest and interest from stakeholders both from within and outside organisations, it is hoped that it will be the former.

GPG reporting will only truly be effective if employers are required to explain the underlying reasons for their gaps and set out targeted plans to address them.

Susannah Donaldson and Helen Corden are employment law experts at Pinsent Masons, the law firm behind Out-Law.com.

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