Gender pay gap persists

If you read nothing else, read this…

• Under the Equality Act 2010, employers can no longer use secrecy clauses to prevent employees from discussing pay rates.
• According to figures from the Office of National Statistics, the median gender pay gap for full-time workers in the private sector is 20.8%.
• Employers can identify any pay gap via pay audits and job evaluations.
• Issues making it difficult for women to get to top jobs should be tackled.

Employers still have a lot of work to do to eradicate pay gaps between male and female employees, says Nicola Sullivan

A charming Sally Hawkins thrust the issue of equal pay into the spotlight as working mum Rita O’Grady in September’s blockbuster film Made in Dagenham – a colourful dramatisation of the 1968 female machinists’ strike over pay policies at the Ford Motor Company. The dispute depicted in the film was influential in the creation of the Equal Pay Act 1970, which prohibits less favourable treatment between men and women in terms of pay and conditions of employment, including holiday, pension rights, benefits and bonuses.

But, several decades on, women are still losing out to their male colleagues on pay. According to the Annual survey of hours and earnings, published by the Office of National Statistics (ONS) in November 2009, the median gender pay gap for full-time staff in the private sector is 20.8%. Data from the Equalities and Human Rights Commission (EHRC) shows financial and insurance services firms are the worst offenders, with a mean gender pay gap of 37.7% for full-time workers.

Even those responsible for setting and implementing pay in organisations are not immune. According to the Employee Benefits Salary Survey 2010, there is a £14,000 differential between the mean salaries of male and female reward professionals.

Stephen Bevan, managing director of The Work Foundation, says: “Within organisations, it is clear there is still discrimination in both the selection for promotion and in post filling. What still has a lot of impact is access to senior positions. I do not think we have seen very much progress. There are still very few women in FTSE-100 companies.

“I do not think there is the mood in the UK to do what Norway has done and make it compulsory to have more equal representation. It is clear there are constrained opportunities for women to achieve senior positions in organisations, particularly after they have come back from a career break. I think that also plays its part in perpetuating the gap.”

Management salary survey

Although the 2010 National management salary survey, published by the Chartered Management Institute (CMI) in August 2010, shows female salaries increased by 2.8% over the previous 12 months, compared with 2.3% for men, the average UK salary for a male manager is £10,071 more than that for a female manager. If the trend continues, women face a 57-year wait before their takehome pay will equal their male colleagues’.

Pay discrepancies also disadvantage women when it comes to saving for retirement. Research conducted by Baring Asset Management in July 2010 shows that 47% of women in Britain who are not retired – a total of 8.7 million – do not have a pension.

The Equality Act 2010, which came into force last month, aims to further reduce the gender pay gap. Under the legislation, secrecy clauses designed to prevent employees discussing their pay are now unenforceable.

The act also contains other measures relating to reporting gender pay gaps, but these have not yet been implemented. For example, it was proposed to introduce regulations requiring private sector employers with at least 250 staff to publish information about the pay differentials between male and female employees, but this measure is still under review by the government.

However, the EHRC has issued guidelines on gender pay reporting in the private and voluntary sectors. It outlines three measurement options for employers to use: an overall single figure, the starting salaries of male and female staff, and the differences between male and female pay by grade and job type. The EHRC also believes employers should be given the chance to explain the context and background of any gender pay gap.

Methods to calculate pay gap

The issue is further complicated by the different methods organisations use to calculate the pay gap. For example, although the EHRC encourages employers to use the mean figure to measure the gap, the ONS works by the median. Duncan Brown, director of HR and business development at the Institute for Employment Studies (IES), says: “There is no consistency. Do employers do base pay? Do they look at total cash? Do they use the median or the mean gap? All of these will produce very different figures, so there needs to be some sort of standardisation about the measures used. The ONS uses the median because it sees that as a better mathematical mid-point, whereas the EHRC says that underplays the size of the gap at the top end with higher-paid men. Generally, the gap is bigger if an employer uses the mean figure.”

An extensive pay audit can give employers a sense of how significant any disparity is between the pay of male and female staff. Dan Wilson, director of consultancy at Northgate Arinso, says: “An audit would [generate] an understanding of the overall pay gap between males and females at a general level. Depending on the depth of the work done, it would then allow employers to look at the detailed gaps between groups of employees or individuals [men and women carrying out the same type of work].”

Mark Thompson, associate director at the Hay Group, adds: “The audit could be relatively painless if employers simply did a straightforward comparison of the average pay, for example in a particular grade. If an employer found the difference was more than 5%, then it is considered to be a material difference, which needs to be explained. Employers will probably have to do something about it, which could involve expense.”

Pay audit results

To prevent the results of a pay audit being skewed, employers should look for pay gaps between men and women in the same jobs, says Wilson. Diligent employers may also want to evaluate job roles to identify those of equal value. Scores can then be given to each job role and those with the same ratings can be compared on pay.

“Employers can draw a direct comparison between two jobs scoring the same, so then it is easy to spot disparities between men and women,” says Wilson. “It gets much harder when they have more of a random pattern of jobs. They have to try to categorise jobs in some way. If they take an average across the organisation, they are likely to have a pay gap and it can be skewed by senior salaries. If they take out executives, for example, the pay gap would be less than if they were included. It starts to create imbalances when they have got substantial pay rates at the top.”

Once employers have identified a gender pay gap, they should communicate around it with the same gusto as with other benefits, says the IES’s Brown. To get staff engaged in other benefits, employers should tell workers what they really want to know about pay. “There is a huge inconsistency with organisations chucking all this information at staff about their pay and benefits,” he says. “So how come employers think it is important to chuck all this stuff at staff [despite] not getting through? The answer is partly because they are not telling staff what they want to know. Employers are silent on what the internal pay differentials are. How can they justify executive pay? What are the equal pay ratios?”

Because there are likely to be fewer women in senior management roles, some employers that find they have a lot of women in lower-paid jobs could help to address the pay gap by finding out what is preventing women from reaching the top. Helen Whitten, managing director of coaching and development firm Positiveworks, says some women may be daunted by the prospect of juggling a high-powered job with their family life. “This leads to quite a lot of conflict about what they want out of life and that gives conflicting messages to bosses,” she says. “The higher up you get in a business, the tougher it is, the more male it is, and the more ridiculously long hours you have to work.”

Help to get higher-paid jobs

Employers can help women to take higher-paid jobs, including offering flexible working and extra paternity leave to working fathers. “They should focus on outcomes rather than presenteeism,” says Whitten. “Having babies is always seen as a woman’s problem. Actually, it is a social need.”

Some employers may be tempted to take advantage of the fact that women are not as good as men at negotiating pay. Sara Laschever, co-author of Why women don’t ask (Princeton University Press, 2003), says: “Women wait to be offered a raise. Often they are not offered one and their bosses think they are willing to work for less. Men will pipe up, knock on the door and say ‘what I am doing is worth more than I am getting paid’.”

Huw Hilditch-Roberts, director of membership and business development at the CMI, says: “Female managers are far less likely to express high ambitions for their long-term career than male managers, which suggests there is a lower level of confidence in women across the UK. If women do not believe in their ability compared to their male colleagues, they are unlikely to consider they deserve an equal rate of pay.”

As well as making it easier for women to reach higher-paid positions, employers must address aspects of workplace culture that might see them miss out on job opportunities, for example social networks. Laschever says: “Women tend to be excluded from, or are peripheral to, the social and professional networks in which men share a lot of information about what is available, such as a promotion, a new project, good resources for tuition reimbursement for training or for travel. Nobody sends out an email to ask who is interested. It is not posted or reported about in the company newsletter. However, the people in power know about it. They tend to be men and they tend to tell people in their networks, who also tend to be men.”

Positiveworks’ Whitten says this means the onus is always on women to develop and improve themselves so they are equipped to deal with the challenges of executive roles.

So employers have a lot to consider when tackling the pay gap, including measuring it, communicating it and addressing cultural issues that may perpetuate it.

Equal pay in the public sector

• Public sector employers are nearer to achieving equal pay than those in the private sector. In 2007, local authorities were required to introduce equal pay structures on a voluntary basis in accordance with the 2004 Local Government Pay Agreement.
• The pay reviews have encouraged staff, predominantly women, to make comparisons and, consequently, launch equal pay claims.
• According to the 2009 Annual survey of hours and earnings, compiled by the Office of National Statistics, the gender pay gap for full-time staff in the public sector was 11.6% in 2009, compared with 20.8% in the private sector. Duncan Brown, director of HR and business development at the Institute for Employment Studies, says: “The public sector already has more openness on pay. It has a duty to publish this information now, and do an equal pay audit. There is generally higher average pay, and stronger flexible working. While a lot of organisations are not equal at senior levels, the public sector is generally at a much better place than the private sector.”
• A government-commissioned review by economist Will Hutton is investigating public sector pay scales. It will recommend how to ensure that an organisation’s managers earn a maximum of 20 times more than the lowest-paid employee.
• By addressing pay relativities, employers could also tackle gender inequality because women tend to be highly represented in low-paid groups. Brown says: “Women are heavily under-represented in the high-paid groups and heavily over-represented in the low-paid groups. Therefore, you could argue that one way of addressing the equal pay gap is to boost the pay of lower-paid workers. Of course, that is also what the national minimum wage does.”

Case study: Tribunal backed Birmingham City Council female staff

Last spring, an employment tribunal ruled against Birmingham City Council in an equal pay case. About 50 female workers in a variety of roles at the council, including lollipop ladies and cleaners, complained that until 2007 they had been excluded from bonuses worth up to 160% of their basic salary, despite being in the same pay grade as male colleagues.

After the ruling, Councillor Alan Rudge, cabinet member for equalities and human resources, said the issue considered by the employment tribunal related to the council’s old pay and grading structure, which was revised in 2007.

In its current drive to cut net expenditure by £330 million over the next three or four years, the authority intends to ensure that any changes made to employees’ terms and conditions and benefits are fair and in accordance with legislation relating to equal pay.

Case study: Gloucestershire County Council keeps a check on equal pay

In 2007, Gloucestershire County Council began evaluating job roles as part of its efforts to ensure all employees were paid equally, regardless of gender, ethnicity, location or age.

It also wanted to ensure there were no discrepancies between departments, and used a job evaluation tool, provided by NorthgateArinso, to scrutinise job descriptions and salaries. The tool sits on a web server and can be accessed by an unlimited number of users at a time.

Linda Hopkins, principal HR adviser at the council, says: “The tool allows us to take an unbiased look at our pay structure, to ensure we provide fair pay systems. It also allows us to examine our pay structure in relation to external market salary bands, to ensure we attract and retain the best staff.”

The work the council has done so far on equal pay makes pay audits less daunting, says Hopkins. “Equal pay audits can strike fear into any local council HR manager, but we feel prepared because we have got all the information we need at our fingertips.”

Read more articles on pay