Lessons from Reporting the Gender Pay
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REPORT | April 2019 Not just a number: lessons from the first year of gender pay gap reporting The CIPD is the professional body for HR and people development. The not-for-profit organisation champions better work and working lives and has been setting the benchmark for excellence in people and organisation development for more than 100 years. It has 150,000 members across the world, provides thought leadership through independent research on the world of work, and offers professional training and accreditation for those working in HR and learning and development. Not just a number: lessons from the first year of gender pay gap reporting Report Not just a number: lessons from the first year of gender pay gap reporting Contents Introduction 2 Methodology 4 Findings 4 Conclusions 14 References 16 Appendix 17 Endnotes 18 Acknowledgements This report was written by Edward Houghton, Mel Green, and Charles Cotton at the CIPD. The authors would like to thank colleagues at the CIPD for their input and guidance, in particular Jon Boys, Claire McCartney, Katy Adalar, Helen Ablett, Robbie Hurley and Ben Willmott. 1 Not just a number: lessons from the first year of gender pay gap reporting 1 Introduction It has been acknowledged for some time that the systemic inequality that women experience in the labour market is a significant and persistent barrier which both damages the prospects and health of women, as well as limits the potential of economic prosperity. The forms this inequality takes are numerous – from sexual harassment, limited career progression and lack of opportunity in work, through to differences in pay between men and women in work. This latter inequality relating to differences in pay has caught the attention of UK policy-makers and business leaders alike, becoming an emotive signal of a continued lack of gender parity in the UK. The moral argument for reducing inequality is clear and must be paramount above all other reasons, but there are also numerous economic benefits to realising gender parity. Broad estimates show that removing gender differences in the workplace could significantly impact the UK economy. For example, McKinsey estimates that the UK could add £150 billion to annual gross domestic product by 2025 if gender parity was achieved (McKinsey 2015). And at the individual level, PwC estimate that closing the gender pay gap could boost overall female earnings by around £80 billion. This equates to an average pay rise of £5,500 per year for each working woman in the UK (PwC 2018). Unfortunately, the UK has some way to go before gender parity is achieved. OECD data shows that the UK’s gender pay gap is 16.5% for full-time employees, above the OECD average of 13.8%, and is the twenty-ninth largest of 35 OECD countries for full-time employees (OECD 2017). And while labour participation for women is high in the UK, a large proportion of this is part-time (40% of female employment). Major barriers to full- time employment include high childcare costs, which keep women in part-time work as 68% of full-time earnings for the family's second income are essentially taxed away as childcare costs (OECD 2012). In light of this the UK Government introduced new regulations in 2017 that require UK organisations to report gender differences in pay for their workforce. When doing this the Government was clear: the UK’s gender pay gap cannot be closed without meaningful action by UK business, and to better drive action organisations should have to report the size of their gender pay gap on an annual basis. Gender pay gap reporting: what is it? Gender pay gap reporting regulations came in from 5 April 2017, with organisations in Great Britain with over 250 employees required to publish a set of indicators on a government website annually, starting by 4 April 2018. Information which is published on the government portal must also be published on the organisation’s website and be available for a minimum of three years – and it must also be accompanied by a signed declaration by the organisation that the information is accurate. If organisations fail to report, the Equality and Human Rights Commission (EHRC) can investigate and take enforcement action (EHRC 2006). Gender pay gap reporting is intended to nudge employer behaviour in several ways: first, by heightening reputation risk for organisations with high gender pay gaps, to prompt critical discussion and debate within organisations about the reasons why gender pay gaps may exist and what can be done to reduce them, and to promote competition between organisations to reduce gender differences in pay. The ultimate aim of the regulations is to prompt organisations to reduce gender differences in pay by ensuring they transparently report their gender pay gap on a publicly available platform. 2 Introduction Not just a number: lessons from the first year of gender pay gap reporting Although not obligatory, the Government also expects most employers to publish a narrative explaining why the pay gap exists, and an action plan for closing it alongside their gender pay gap figures. These action plans are designed to demonstrate to stakeholders, including employees, the actions organisations are committed to, and the impact of steps they’ve been taking to close their gender pay gap. Gender pay gap reporting offers a unique opportunity for HR professionals to highlight the potential value and impact the profession can have on significant business and societal issues. Gender differences in pay represent a topic of considerable interest to many stakeholders, and one which is very much in the public eye. Many of the issues surfaced in the gender pay gap debate, for example inclusion, progression, and reward, are areas which people professionals have considerable expertise and unique knowledge. You can find out more about gender pay gap reporting by visiting the CIPD’s factsheet: www.cipd.co.uk/knowledge/fundamentals/relations/gender-pay gap-reporting/factsheet Gender pay gap reporting: illuminating idea or a simple blunt instrument? In many ways the introduction of gender pay gap reporting can be viewed as a pilot for the mandatory reporting of other workforce information. As trust has continued to decline in organisations following the financial crisis of 2008, subsequent recession and a slew of corporate governance scandals, growing pressure has been exerted on organisations to ‘show their working’ with regards to the management and treatment of the workforce. In this light the success of gender pay gap reporting could lead to improved transparency on many other forms of workforce information. However, as with most pilots, the first year of reporting has been fraught with problems, namely: • Confusing the gender pay gap with equal pay: a lack of awareness amongst the public meant that the data reported for the gender pay gap was often interpreted as evidence of different levels of pay for the same work: something which has been illegal since the 1970 Equal Pay Act. As it is illegal to pay men and women differently for jobs of the same value, the reason for pay gaps, in theory, is unlikely to be direct discrimination of women, yet this is a common narrative used to describe the issue. • Reliance on a single measure for a complex issue: a variety of factors are known to influence gender differences in pay, one of which may be discrimination within the workplace. However, this is likely not the single cause, nor in some environments may it be the largest factor creating gender differences in pay. Mandatory reporting of a set of numbers, without an appreciation of these other complex and related factors, may blind businesses and policy-makers to the real cause of disparities in pay that must also be tackled through focused action. • Increased burden on organisations to report and justify their position: some commentators note that the requirement to report is more red tape and bureaucracy to tackle an issue that simply isn’t a problem of business, and that businesses are being unfairly blamed for. This view recognises that the gender pay gap is a sign of deeper, more complex issues beyond the workplace (for example in education) that require greater attention. • Bias in the way gender pay gap data is reported: the way the Government’s online portal requests data appears to be biased: the portal asks respondents to report how women earn x% less than men, a statement which assumes discrimination (IEA 2018). 3 Introduction Not just a number: lessons from the first year of gender pay gap reporting While gender pay gap reporting has been successful in prompting large employers to publish their figures, what is important is that these employers act to reduce, where relevant, the size of their pay gaps. It is unlikely that the size of gender pay gaps will have changed significantly by the second year of reporting in 2019. In fact, by some estimates, at its current rate it will take almost a quarter of a century (24 years) to close the UK’s gender pay gap (PwC 2019). It is therefore difficult to know whether, after just one year of reporting, gender pay gap reporting is having any effect on closing the gap. It’s clear then that gender pay gap reporting in the UK is very much in its infancy. With this in mind we set about investigating gender pay gap reporting from the perspective of HR to understand their views and to find out whether or not HR practitioners are ready to realise its potential. 2 Methodology We conducted a cross-sectional survey of mid-level and senior HR professionals in February 2019. In total 731 UK-based employees working for organisations of over 250 employees responded to the survey, which was administered by YouGov through their panels of participants.