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The gender pay gap – lessons US businesses can learn from the UK

Posted: 06/12/2018

With 2019 fast approaching, it is noticeable that a number of the new labour laws in California have their origin in the #MeToo movement and the increased scrutiny of harassment at work protections. These laws are to be welcomed, as both the UK and the US continue to be well behind the pace of change when it comes to gender equality, with Iceland and other Scandinavian countries leading the way globally. 

With stories of sex discrimination and gender inequality breaking most days and impactful social media campaigns promoting women’s rights coming to the fore (consider Women on Boards quotas and Bill No 826), the pressure on businesses operating in both the UK and US to address gender inequality in the workplace is increasing.

In the UK, we have seen close public scrutiny of the BBC in light of the pay disparity between male and female presenters. Large retailers are being threatened with equal pay claims, which for one retailer could reportedly amount to a liability of £4 billion ($5.5 billion). Such claims will surely challenge the culture of pay secrecy that persists in the UK. Recent research from leading campaigning charity The Fawcett Society found that 61% of workers would be uncomfortable asking a colleague how much they earn. Indeed, nearly 50 years since the UK passed its Equal Pay Act, one in three men and women in work do not know that it is illegal to pay women and men differently for equal work.

In the last year, a number of jurisdictions (Delaware, Massachusetts, Oregon, Puerto Rico, Philadelphia, and New York City) have passed laws banning employers from asking job applicants about their salary history. The argument is that the gender pay gap is exacerbated when employers base compensation on previous rates of pay, which may reflect historic pay discrimination by previous employers. In summer 2017, San Francisco also passed a similar ordinance that took effect on 1 July 2018. Indeed, the UK may benefit from laws that mirror these laws and the forthcoming amendments to ambiguities in California’s ban, requiring employers to provide pay scales to external applicants.

What information is required to be reported in the UK? 

The UK’s Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 require private sector employers with 250 or more employees to publish certain gender pay gap information on their UK websites. The information must include:

  • mean gender pay gap figures for hourly pay and bonus pay – by identifying the pay of the average earner, the mean considers the low and high earners. This is useful because women are often over-represented at low-earning levels and men are frequently over-represented at the higher-earning levels;
  • median gender pay gap figures for hourly pay and bonus pay – by identifying the pay of the middle earner, the median is considered the best representation of the typical difference in pay between men and women;
  • the proportion of men and women who received a bonus; and
  • the proportion of men and women in each quartile of the pay structure – this data enables employers to check where the progress of women may be held up.

This pay information includes those working under a contract of employment, a contract of apprenticeship or a contract personally to carry out work. Depending on the nature of the worker's contract, this can include self-employed contractors who are not on the employer's payroll system.

Publication requires an annual written statement, signed by an appropriate senior individual, confirming that the published information is accurate. Both the employer and the senior individual therefore risk external and internal reputational damage if that information is incorrect. Care is needed in preparing the statement: there are already examples of employers not reporting accurate figures, such as the inaccurate handling of bonus payments. The Financial Times has 'named and shamed' some employers for publishing obviously inaccurate results (eg all figures as zero). Employers are required to retain this information online for three years and to upload the information to the UK Government’s website.

With this new reporting obligation, a common public misconception has arisen. 'Gender pay' is a concept that considers the difference in average rates of pay between male and female employees within an employer, and on a broader, often national, basis. However, a large gender pay gap does not necessarily mean that male and female employees are paid unequally. 'Equal pay' involves the entitlement on the part of individual female employees to receive pay that is equal to that of comparable male employees, and vice versa. The position is the same in both the UK and the US.

It is worth noting that the Government Equalities Office wrote to relevant employers who had not yet registered reminding them to do so before the 4 April 2018 deadline. The letter led to 100% of applicable employers submitting their figures.

Providing a voluntary narrative

Now that 10,532 private and public sector employers have reported their data for 2017/18, the focus in the UK is very much on gender pay and taking steps to reduce the gap in time for the second set of reports due in April 2019. The data has established that the gender pay gap for all employees was 17.9% at April 2018. Analysis of the current causes for the gap include there being fewer women in senior positions, part-time work, gender stereotypes, unconscious bias, lack of networking and an unexplained element, which may indicate discriminatory behaviour. It follows that the publication of the minimum data only tells part of the story. Recent data from the UK Government’s Equalities Office indicates that at May 2018 less than half of affected employers have an action plan to start addressing their gender pay gaps. 

It is perhaps unsurprising therefore that whilst not legally required to do so, the UK Government continues to encourage employers to provide a voluntary narrative explaining the reasons behind any gap and actions being taken to reduce it. Those that have provided a narrative see this as an opportunity to put their data into context (through further analysis of the data, such as breaking it down by seniority or job categories) and to 'sell' themselves as an attractive and rewarding place to work.

For example, the gender gap in the tech sector starts well before the workplace, in schools and universities. The tech sector is male-dominated, which can discourage women and girls from pursuing a career in it. Nor does a general lack of female role models, with just 5% of leadership positions in the UK tech sector held by women, help inspire young women to seek a career in the sector. A report by Mercer found that while the UK high-tech industry has an equal number of men and women working in lower-level roles, a lack of progression for women starts to manifest itself in the mid-level and executive roles - the number of male tech workers jumps from 51% at junior level to 75% at the mid-level. Women account for just 13% at executive level.

Employers from a variety of sectors are taking the opportunity to publicise how they are tackling their gender pay gaps. Steps include unconscious bias training, flexible working for men and women, women's networks and mentoring programmes, as well as more ambitious projects. Some have teamed up with peer organisations to develop industry-wide recruitment guidelines that encourage greater diversity.

However, a recent study by University College London’s Institute for Education suggests that work needs to be done at a much earlier stage in order to prevent the perpetuation of the gender pay gap. The study of over 7,700 UK teenagers indicated that girls aspired to less well-paid jobs than boys, despite being more likely to expect to go to university. Research carried out by PwC in 2017 showed that an important factor for females in their careers was feeling the work they do has a wider impact and makes the world a better place. Some tech sector work has the potential to meet this need, a point that certain employers are keen to make.

Consequently, helping employees and potential future recruits to understand the pay gap and encouraging them to participate in related HR initiatives will be of critical importance in procuring employee engagement, reducing the potential for complaints and employee turnover, and mitigating the risk of potential equal pay litigation. 

This is just the beginning…

Although there are no current plans to extend the scope of the regulations, the UK Government has considered reducing the threshold of 250 employees for gender pay gap reporting in order to capture smaller employers. There have also been calls for the UK Government to require employers with gaps above a certain level to report further data, such as parental policies and recruitment and promotion demographics. Additional measures, such as race or age, could be included in the future. At the current rate of change, the World Economic Forum has calculated that the gap will be closed in the UK in 2235. This ignores the gender pension gap, which is twice the size of the gender pay gap.

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