The gender pay gap has been a problem for decades.
By forcing companies to publish their pay gaps, the UK government hopes to turn the tide. Two battles are being waged when it comes to gender parity in the UK. In one, some progress has been made. In the other, little has changed.
In 2011, Lord Davies published a damning report on the lack of women on boards at the UK’s top public companies. At the time, the Equality and Human Rights Commission calculated it would take 73 years to achieve gender-balanced boardrooms in the UK “at the current rate of change”. But FTSE 100 CEOs met Lord Davies’ target to ensure 25% of board seats went to women by 2015. So, with progress made at the top level, the focus has shifted to the second front: pay inequality.
The pay gap
On average, women now tend to earn around 18% less than men, despite ministers outlawing unequal pay about 45 years ago. With mounting evidence highlighting continuing inequality, the government has acted to “eliminate the gender pay gap in a generation”. The solution? Shame.
As of April this year, companies with more than 250 employees must start preparing to publish their gender pay and bonus gaps. They must publish the gaps on their websites by April 2018. Most organisations are expected to have a gender pay gap, but some sectors are expected to show bigger gaps than others – for example, the male-dominated financial services sector. So far these expectations have been borne out by early reporters: Virgin Money’s pay gap is 36% – twice the national average.
The big accountancy firms preempted the government’s initiative and have been voluntarily publishing their pay gaps for the past few years. PwC pays women 15% less than men. In 2016, KPMG reported an overall gender pay gap of 20% and Deloitte paid men 16.8% more, but its calculation was based on annual salary and didn’t include any bonus payments. It’ll be interesting to see if these figures change in light of the government’s new requirements. “It’s still not natural for women to get to the top of an organisation,” says Sarah Churchman, HR director at PwC. “Until it becomes natural, we’ve got to keep a spotlight on the issue, so regulations are a good thing.”
Will it work?
There are still questions as to whether the measure will work. Companies have a 12-month window in which to comply. Until that time is up, it’s not clear how the government will enforce the new regulations. But the administrative burden on companies shouldn’t be underestimated and it’s perhaps part of the reason why so few companies have yet to report. At the time of going to press, only 13 companies had disclosed their pay gap on the government’s site.
Also, given that this is the first year of reporting, companies might want to take time to ensure they have a clear narrative to accompany their headline figure. “It’s too simplistic to say that, if you have a gap, you have a problem,” says Clare Gregory, an employment lawyer at DLA Piper. “But it does give you the data you need to analyse your situation and the reasons why you have a gap if that’s the case. Regulations are a blunt instrument, because one or two people can distort the numbers significantly.”
Correcting workplace inequality isn’t just about pay, and the new reporting rules are unlikely to change behaviour in isolation. But, says Churchman: “It will help in the long term. We’ve got to the point where the more we drive accountability and transparency, the more likely we are to see change. We saw change driven by the Davies report, so the more we can go for voluntary changes, the better.”
Michelle Perry is a writer for Accounting Technician Magazine.