Need to know:
- Since the BBC revealed the salaries of its highest-paid employees, pay has dominated the national debate. Pressure is growing for organisations with more than 250 employees to reveal their gender pay gap data before the government’s deadline of April 2018.
- Some organisations may encounter hurdles when assembling their data, but the bigger issue will most likely be striking the right tone in their narrative.
- It is important to get started if employers have not already. If a pay gap exists, most organisations will want to accompany their data with a strategy to close it, which will take some time to develop.
In an unprecedented age of openness, money is one of the last bastions of tight-lipped embarrassment for many British people. Politics and sex may have become acceptable dinner party conversation, but no matter how much wine is consumed, talking about pay is practically unheard of.
Until now. In the last few months, the nation’s stiff upper lip on pay has not so much weakened as completely collapsed. When the BBC published its pay gap figures in July 2017, the scale of the inconsistencies between male and female presenters quickly dominated the national debate.
Momentum is growing. As at the beginning of August, journalists at the Financial Times had voted in favour of striking over the newspaper’s own pay gap should it be required.
This debate has only just begun. Government legislation means that every UK employer in the private and voluntary sector with more than 250 staff is required to report on its gender pay gap by 4 April 2018, using a snapshot date of 5 April 2017. Public sector employers with 250 or more employees must publish their data by 30 March 2018, with a snapshot date of 30 March 2017. The results will be published on a government website, and each organisation must also publish them on their own site for at least three years. The exercise must be repeated annually.
As the BBC has shown, the reputational stakes are high. There is a great deal of pressure to get it right. So what should employers be doing to prepare?
Blind data
On paper, the regulatory requirements are straightforward. Employers must report four figures: the gender pay gap (mean and median averages), gender bonus gap (mean and median averages), the proportion of men and women receiving bonuses, and the proportion of men and women in each quartile of the organisation’s pay structure.
However, experts advise employers not to underestimate the time involved in gathering and reporting the data. Andrew MacLeod, head of Aon Hewitt’s Europe, Middle East and Africa (EMEA) reward data services business, says: “Early engagement is crucial.”
Employers should have taken their first data snapshot in April 2017 and be in the process of cleaning and analysing it, plus making the necessary calculations, says Sarah Ozanne, a partner in the employment team at law firm CMS.
While the government has published guidelines, there are some areas that remain unclear. One tricky area is bonuses and share options, says Ozanne. If an employer has complicated incentive arrangements, it might be hard to work out when these count towards reported pay.
Deborah Rees, director of consulting at Innecto Reward Consulting, says: “One of the things people are frustrated by is for bonus calculations, [employers] can’t pro rate the actual payment [in their calculations]. Say, for example, [they] have three senior women, all of whom happen to work part time, [they] would have to declare their bonus as is. So if even if they work three days a week and are getting a bonus, [the employer is] comparing it to a man who is paid for five days a week.”
Overtime is another area that could prove complicated, says Duncan Brown, head of HR consultancy at the Institute for Employment Studies (IES). “Overtime, shift pay; there is lots of complexity over pay in most organisations,” he says.
Consistency and transparency are the watchwords, says Ozanne. “Our advice is that sometimes there is no clear answer and [employers] have to take a view. We are saying, ‘that’s fine’ and [they] have to apply the same view or assumption to all [their] calculations so [they] get consistency across the board. [They] should use the supporting narrative to explain what [they] have done and how [they] have done it.”
Telling the story
So the data has been gathered and the maths has been cracked. For an employer, revealing the organisation’s pay gap, and explaining what it plans to do about it, is where the real challenge begins.
MacLeod says: “This is definitely not something [employers] want to leave until quarter one of next year. The numbers are not going to look good for most organisations. We know that across the economy, the gender pay gap is 18%. By industry that will vary. Employers need to think about how they best communicate this to their stakeholders.
“Progressive organisations are going further and providing supplemental information. Probably the biggest challenge organisations have is that a lot of stakeholders, particularly employees, are going to conflate the notion of gender pay with equal pay and these are two very different notions. Equal pay is all about paying fairly for similar work or equal value. Gender pay is reflecting the underlying workforce demographics within an organisation. It is more about diversity and inclusion, how do you get more women into senior management posts? This is a really challenging area for some organisations.”
One way to shine a light on this is to show the gender split and pay gap for different levels in the workforce, as many of the organisations which have reported already have done. Often, senior staff are predominantly male, so the issue is getting more women into senior positions, rather than a direct unfairness in how men and women are paid.
Rather than treating this as a compliance exercise or reputational hazard, gender pay reporting is an opportunity to really get to grips with the underlying issues. As Rees says: “[The legislation] is fantastic and shines a light on things a lot of organisations would rather not shine a light on. At the macro level, think about how this is going to develop over the next few years. How [is an employer] going to ensure that [its] gender pay gap narrows?”
Virgin Money moved early to tackle its pay gap. The financial services organisation had been working to improve gender equality for several years, and first reported its pay gap voluntarily in 2016.
Matt Elliott, people director at Virgin Money, explains: “We understood our gap is a result of under-representation of women in senior roles and under-representation of men in junior roles. We don’t have a fair pay problem, we are very confident we pay fairly for people in similar jobs. This is about balance. That means more women in senior roles and more men in junior roles.”
When it developed its strategy several years ago, Virgin Money started by working out its goal: gender balance throughout the organisation. It decided to aim for a 50/50 target by 2020, with a margin for error of 10%, which is realistic and appropriate, says Elliott.
He advises other employers going through the reporting process to communicate with their staff well ahead of reporting the figures to the outside world. “It’s important for all [employers] to be honest,” he explains. “Everyone has a starting point. The question is, does it matter and what are they doing about it? I think those are the important elements. We have made it clear that we are looking for balance throughout the [organisation] and they understand that is a fair thing to do. Therefore, the gap doesn’t come as a surprise, [because] people are really well informed of it.”
Other employers have similar issues. EasyJet has added context to its own gender pay gap commentary, which features in its 2016 annual report. At present, the airline’s pilots are predominantly male and the majority of its cabin crew are female. Pilots are paid more, but salaries for equivalent roles are broadly equal across the genders, making this a gender pay issue, not a discrimination issue.
Virgin Money’s Elliott does not understand the reticence among other employers to disclose the gap. “I don’t understand the delay. Because of the increasing profile around this, I think people who work for those 9,000 [employers which have yet to declare] are going to start to wonder why it hasn’t been disclosed and they are either going to take one of two things from it.
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“One, [the employer] doesn’t know what the pay gap is, which isn’t good because obviously it is important. It’s not a good answer, it should know and be focused on it. Two, [it does] know what it is and is not telling [staff], which is more likely, to be honest. Then it gets to a point of transparency with [an organisation’s] own people,” he says.
We may only be at the start, but the pressure is only set to intensify as the years go on, says Brown. “The first year will be the first time this data is out in the open. But, in some ways, the most interesting bit will be years two, three and four, because if gaps aren’t reducing, the pressure will ratchet up.”