By 4th April 2018 all UK companies with more than 250 employees will be required to disclose their gender pay gap figures on their website in an accessible manner and provide the government with the data for official publication on the Gov.uk website.
What is the gender pay gap?
Gender Pay Gap reporting is different from an equal pay audit but is sometimes confused. Equal pay means that there should be no difference in the contractual terms of a women and a man doing equal work, who both work for the same employer. This has been a legal right since 1970. In contrast, the gender pay gap is the average difference between men and women’s aggregate hourly pay.
Companies are required to report on six key figures:
- Difference between men and women’s mean hourly rate of pay;
- Difference between men and women’s median hourly rate of pay;
- Difference between men and women’s mean bonus pay;
- Difference between men and women’s median bonus pay;
- Proportion of male and female employees paid bonus pay;
- Proportion of male and female employees falling into each quartile pay band, where quartiles are defined by listing earners from lowest to highest.
To date only a small proportion of companies have reported their results (813 at the time of publication). Against the backdrop of the #MeToo campaign and the much publicised BBC pay dispute, we can expect a frenzy of interest and commentary as the April deadline approaches. From a reputation as well as business point of view, explaining the figures and how a company intends to bridge the gap will be an important communications challenge.
What can companies expect?
Companies should expect a drive for a more transparent culture around pay and greater communication with their staff on pay and diversity issues. Companies may face negative publicity and reputation damage if their statistics demonstrate a large gender pay gap for which there is no reasonable explanation. There may also be issues in terms of staff moral, retention and recruitment. Furthermore, increased publicity on the issue as well as the provision of base data for organisations, is likely to lead to an increase in the willingness of employees to challenge salaries through equal pay claims or other employment tribunal proceedings.
Although there is no requirement for employers to take any specific action as a result of their reports, the resulting figures will inevitably highlight issues which need careful thought and planning. Companies are encouraged not only to provide a narrative to explain the figures, but also an action plan showing how they propose to close the gender pay gap within their organisation.
Planning your report
It is critical that companies invest suitable time and resource to understand their figures and what lies behind them. Key elements of planning include:
- Ensuring the data used is accurate and that any judgments applied are clearly recorded;
- Building a strong and clear narrative to explain:
- What the report is about;
- The figures and key factors influencing them;
- The company’s approach to closing the gender pay gap and equal pay, including actions and achievements to date;
- Developing a clear and measurable action plan detailing the company’s commitment to addressing any issues and achieving further progress;
- Agreeing a comprehensive communications plan for key stakeholder audiences, both internal and external.
Even if you’re not covered by the regulations, you should consider this exercise. Employees in all organisations, no matter what size, are increasingly likely to question an organisation’s pay structure. The rise of social media and job review websites such as Glassdoor, as well as the growing popularity of anonymous Google docs, is providing greater power for anyone disgruntled to build a collective in an effort to upend perceived inequality. Should the government lower the reporting threshold from 250 employees, those firms that have been already collecting data and taking action will be far better placed to respond.
Finally, and most importantly, research suggests that a more equal workforce translates not just into improved staff morale, but also a more productive workforce. And that may mean that reducing the gender pay gap equals greater profits.