Long read: gender pay gap and AAT’s recommendations

At precisely 4.34pm on 7 November, hundreds of French women walked out of work to join a demonstration in central Paris demanding equal pay.

Their act was more than just a thought-provoking gimmick. While women in France make up 48% of the workforce, men earn about 15% more than their female counterparts, according to a 2014 report by statistical body, Eurostat.

French women must work 38.2 days a year more than men to earn the same salary, calculated feminist group, Les Glorieuses, calling for the 4.34pm walkout.

Thousands of women in Iceland staged a similar stunt at 2.38pm on 24 October, to demonstrate the country’s 14 percent wage gap.

Meanwhile in the UK, annual figures released by the Office of National Statistics produced the headline-grabbing conclusion that, despite the passing of the Equal Pay Act 45 years ago, the average pay for full-time female employees is still 9.4% lower than for men.

A report by the World Economic Forum found that overall the international pay gap will not be closed until the distant date of 2186.

The figures are stark, but is calculating the gender pay gap really so simple?

While there is general agreement that it exists, debate around the issue generates strong passions between those who believe women are being oppressed by sexism and discrimination and those who argue that figures are being manipulated to mask the real reasons for differences in pay.

One thing for sure is that in the UK, the gender pay gap is set to be one of the big political buzzwords of 2017 as the government introduces a new law in April requiring all public and private sector companies with more than 250 employees to report the pay differential between men and women.

One of the law’s biggest advocates is the Fawcett Society, the UK’s leading charity on women’s rights, who believe that wage discrepancy is one of the most dramatic examples of ongoing inequality for women.

“I don’t think it’s an exercise in accuracy, so I don’t think we’re expecting employers to come up with figures that are entirely accurate in terms of the true picture of their organisation but we think the value is in the process,” said Fawcett Society Chief Executive, Sam Smethers.

“We welcome it simply because it will focus the minds of employers on something that they don’t very often think very much about,” she said.

“The fact that they have to be public about the figure will mean that they also have to think what will people think about us when we tell them we’ve got a pay gap of X.”

But while the new legislation goes a small part of the way towards quickening the glacial pace of progress on women’s rights, Smethers argued that many other related issues need to be tackled.

“The pay gap is a problem caused by multiple factors and some of those are big structural problems in our economies and in our workplaces,” she said.

Currently about 80% of Britain’s traditionally lower-paid care workforce is female, compared to lower female participation in occupations traditionally viewed as male-orientated, like engineering.

“Occupational segregation” means that inequality has been loaded into the economy from the outset, argued Smethers. “It helps to drive the gender pay gap over time.”

Further up the career ladder, an imbalanced approach to parental leave wedges the pay gap even wider.

But even without children, women could struggle to progress, said Smethers.

“It’s because of the very male environment at the top of the organisation and they’re not fitting in with that. Either they look at that and think it’s not for me or the men at that level are recruiting in their own image and consciously or unconsciously streaming women out.”

AAT has a particular interest in the debate, because 70% of its members are women. Reports in 2015 pointed to a growing pay gap between men and women registered with the Institute of Chartered Accountants in England and Wales (ICAEW).

According to a 2015 salary survey from the Institute and recruitment agency, Stott and May, male chartered accountants were earning an average salary of £100,900, compared to an average of £63,900 for women, a gap which had increased by 5.4% since 2014.

The report concluded that women over 45 saw the biggest drop in salaries.

AAT has been particularly proactive in the debate. Hosting both a roundtable between the accountancy and government bodies, and contributing to the government’s consultation process on the new reporting rules over the past 12 months.

The reporting requirement is “definitely a step in the right direction”, said Phil Hall, AAT’s head of public affairs and public policy.

But he also pointed to glaring gaps in the requirements.

“One of the things that it doesn’t do, and one of the things that AAT has recommended in its response to the government consultation on this, is that it should also ask the question of whether or not pay rises have been asked for,” said Hall.

“It should be recorded for men and women, and then more importantly whether requested rises have been received.”

The only country that asks these questions in a formal way is Australia.

Hall pointed to recent research from London’s Cass Business School and Warwick and Wisconsin universities that confirms that women do ask for pay rises just as frequently as men, but often do not get them, although this trend does not apply to those under 40.

Hall also suggested that the Government was wrong to exclude off-payroll workers from gender pay gap reporting requirements.

Although some self-employed people will be covered by the reporting requirements providing they are engaged directly with employers – employees under the definition of the Equality Act 2010 – this will not include off-payroll workers i.e. individuals using a limited company structure.

“The big increase in off-payroll working means these workers should also be included in reporting requirements. Not to do so is likely to skew the results because individuals working through limited companies are often at the higher ends of the pay scale and so masking their earnings is likely to make the gender pay gap appear smaller than it may actually be,” stated Hall.

He predicted, however, that a positive development would transpire with the government’s new living wage, which is set to reach £9 an hour by 2020. By this time, HM Treasury analysis suggests that the gender pay gap will be removed for the lowest paid.

“Of course this still leaves millions of others, not in the lowest paid category, experiencing some sort of pay differential for which more action must be taken,” said Hall.

Not all have welcomed the government’s move to force public statistics on gender pay gaps in what is a complicated, multi-layered debate where there is much disagreement over how the wage difference is calculated.

The London-based Institute of Economic Affairs, a free market think tank, has argued against the merits of the new legislation. Its head of news, Kate Andrews, went as far as to say the law could be “counterproductive.”

Businesses could become so focussed on producing their technical pay gap statistics that employee bargaining power could be reduced, she argued.

“Companies are going to be trying to completely streamline their male and female employees to be on the exact same track even if that is not what the employees individually want,” said Andrews.

“So we’re really cracking down on individuals’ powers to negotiate their own contracts on their own terms.”

The underlying problem, she said, was that figures were often manipulated in a “deceptive” way to “push false gender pay gap theories”, without targeting the real reasons for inequalities between male and female employees.

“Most of these studies do not compare jobs like for like, do not take into account age, which obviously has a huge impact on the wages that you’re comparing, and most importantly a lot are intentionally taking these stats and bloating them as far as they can,” she said.

“In order to actually prove that there is a pay gap between men and women that fundamentally comes down to sex and nothing else you have to try to account for any other thing that could potentially be a hiccup in that process.”

In the IEA’s own analysis of ONS figures, looking at hourly and not yearly wages, younger women aged 22 to 39 actually earned slightly more than their male counterparts, she said.

“I think it’s a huge disservice towards working women to try to make them feel like victims in a place where actually on average they’re probably doing better.”

Problems arose further down the line when women took more time off work to have children.

“That’s where you see the pay gap increase,” said Andrews. “This does not mean that there isn’t an issue but often times the legislation that we try to bring in around companies having to publish their pay gap stats aren’t actually targeting the problem.”

The overlying reason for wage discrepancies was childcare, particularly in the UK where it was prohibitively expensive, argued Andrews.

“There are huge issues around childcare, around maternity care, around shared parental leave. But again I think this is the real debate to be had and it’s a bit harder.”

Head of research at the Chartered Management Institute, Patrick Woodman, agreed that the return to work from parental leave was a classic issue holding back the progression of women.

“Organisations can be looking at whether they are providing men with equal levels of support to take time off as women,” he said.

“Leaders can play a great role in role-modelling that and legitimising it within the organisation.”

The CMI recently launched a six point “blueprint for balance” to help resolve a situation where women make up 73% of junior managers but only 32% make it to director level, and where male managers are 40% more likely than females to be promoted.

The plan includes recommendations on recruitment, mentoring, rewards, and flexible working.

Woodman believes the new requirements on reporting the gender pay gap will boost transparency in a positive way.

“Sometimes there are going to be areas where companies will be nervous about what the data says but that’s got to be good because they are being forced to confront it and to talk about what it means and what they’re doing about it,” he said.

For companies who are nervous, there is no need to panic. Firms like Croner Consulting in Leicestershire are already poised to offer their services in advising and making gender pay gap calculations.

Croner would be carrying out audits based on raw data about the gender, hours and bonuses of company employees, said Clare Parkinson, a business manager. “Obviously it’s independent…so it makes it far more credible,” she said.

Parkinson cautioned that businesses needed to have a greater sense of urgency about the impending changes.

“At the moment people seem pretty relaxed about the fact that it’s coming up. We’re really trying to urge companies now to get ahead of the legislation. Act now and give yourself time to assess what risks you may have.”

Nicola Smith has spent a decade reporting for The Sunday Times on both the European Union and South Asia.

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