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Mind the gap – new guidance on closing the gender pay gap

Posted on 27 March 2019

Gender logos being drawn on a chalk board

With the next gender pay gap reporting deadline on 4 April 2019 fast approaching, many employers will no doubt be busy preparing their statistics and narratives for publication (see here for our Gender Pay Reporting Guide) Meanwhile, four in ten private companies that have published their gender pay gap so far reported wider gaps than they did last year. Whether or not the gap has increased, it is clear that there is no quick fix and employers should consider taking targeted action to close the gap.

To that end, the Government Equalities Office has published two sets of practical guidance to help employers diagnose why they have a gender pay gap, and develop an effective action plan to close it. 

Key questions to understand your gender pay gap

Addressing the gender pay gap is about more than just reporting statistics. The guidance encourages employers to look beyond the raw percentages and ask eight key questions to identify potential areas for improvement. The questions focus on themes of recruitment and promotion, pay and performance ratings, progression for part-time employees and childcare responsibilities, including:

  • Is there a gender imbalance in the seniority structure and in promotions and applications? Employers should examine their own seniority or grade structure to identify gender imbalance, and compare the gender ratios in each grade against the gender ratios of those applying for promotion to a higher grade. Determine whether women fall out at a particular stage or fail to enter the organisation at more senior levels, and the reasons.
  • Do men and women leave at different rates? Employers could use surveys to identify issues such as engagement and feelings of belonging and check whether structural issues are affecting retention.
  • Do particular aspects of pay differ by gender? This may include looking at starting salaries by gender, overtime pay and bonus. A gender pay gap is different to equal pay but analysing whether there are any equal pay issues, for example through an equal pay audit, can help identify whether particular aspects of pay disparity may also contribute to a gender pay gap, and help address both unequal pay and the pay gap.  
  • Are you supporting both men and women to take on caring responsibilities? Employers should look at the uptake of flexible working, shared parental leave and paternity leave by gender, and may use staff surveys to assess organisational culture and whether employees of either gender know about and feel supported to take up the options available to them.

Steps to developing a gender pay gap action plan 

In separate guidance employers are encouraged to develop an effective gender pay gap action plan. To do so, employers need to understand what drives the gender pay gap within their organisation, as evidence shows that it can vary greatly even within the same sector. The guidance recommends that employers consult and engage with as wide a range of stakeholders as possible to develop an action plan through informal feedback, surveys and working groups. Employers should also encourage a system of monitoring, reporting and evaluating by setting targets and nominating individuals to assess the plan’s development. Finally, the guidance stresses that employers should allow enough time for the process, as developing an action plan is an ongoing and iterative journey.

Comment

Producing a gender pay gap action plan is not obligatory under the gender pay legislation. Whilst the government urges employers to produce a plan alongside their figures, it considered that making it mandatory might result in a prescriptive format with little value to employers and employees. Despite this, the government estimates that nearly half of employers have published action plans in the first year of reporting. This indicates that employers acknowledge that reporting alone will not be enough to effect meaningful change. It remains to be seen whether the government will go beyond simple reporting requirements and in future require employers to adopt action plans to reduce their gender pay gap (as they have done in Sweden for example). This is not likely to happen any time soon, as the government says it will wait five years before reviewing gender pay gap legislation.

It is clear that workplace pay equality will not be achieved by a single measure of reporting, as shown by the sizeable proportion of companies that have reported an increased gap so far. Employers will need to be patient and implement long term action plans before they see the desired results. For example, if employers’ plans include recruiting more female employees at entry level to eventually promote them to senior roles, this could widen the pay gap in the short-term. It is crucial however, that employers explain discrepancies, and demonstrate that actionable measures are being put in place to address them. This requires time and resources.

There is no doubt that the reporting requirements have put the gender pay gap into sharp focus in the media and prompted a wider debate on equality and diversity in the workplace. More companies have prioritised reducing their gender pay gap since the introduction of gender pay gap legislation in 2017. And the trend of increased transparency and publication of workplace data to tackle inequality seems set to continue (as we explore in Data reporting by employers – a new trend?) For example, in 2020, directors of UK-listed companies with 250 or more employees will be required to report annually on the difference in pay between their CEO and average worker. In addition, a requirement to report on the ethnicity pay gap is also likely to be introduced following a government consultation that closed earlier this year. 

Employers who engage with their employees on the issue of pay and diversity, who work to gain a better understanding of the causes and culture shaping any pay gaps within their organisations and who take meaningful action to address them, will be better placed to face the new era of transparency.

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