What are the most effective ways of addressing pay gaps?

Need to know:

  • A culture of transparency and a commitment to reporting all pay gaps within the organisation is a first step to tackling them.
  • Sharing an action plan of next steps, for example, organisation-wide salary reviews and providing access to all pay data, builds on that transparency.
  • The disaggregation of data will expose the nuances and outcomes for different groups and any gaps between policy and practice that may contribute to pay gaps.

Unequal pay is one of the top factors impacting inequality in workplaces today, with gender pay gaps attracting the lion’s share of attention in recent years. Pressures caused by the Covid-19 (Coronavius) pandemic saw the deadline to report gender pay figures for 2019-2020 suspended until 5 October 2021.

However other groups are also affected and employees may also be facing ethnicity, or disability-related pay disparity, crucial at a time when diversity equity and inclusion (DE&I) is firmly on the business agenda.

Gender pay gap reporting has been a legal requirement for employers with more than 250 employees since 2017, but without regulatory demand for the monitoring of other pay gaps, these could easily be overlooked. The disability pay gap for UK employees stood at 20%, according to the Trades Union Congress (TUC) Disability employment and pay gap 2020 report.

Increased transparency needed

While the Office for National Statistics (ONS) found that ethnicity pay gaps had fallen in 2019, with median hourly earnings for white workers just over 2% higher than those of ethnic minority workers, it admitted that the simple comparison between white and ethnic minority groups, masked a variety of experiences among different ethnic minorities.

Leila McKenzie-Delis, founder of diversity and inclusion charity the McKenzie Delis Foundation, says: “There should be much more transparency and a legal requirement on organisations to report in this way if we are really to shift the dial on diversity, equity and inclusion. At the moment, businesses can make a choice to report in this way, but regulation is key to ensure we create a level playing field.”

In its 2018 report Measuring and reporting on disability and ethnicity pay gaps, The Equality and Human Rights Commission noted that the collecting and transparently reporting of their gender pay data gave employers a new sense of urgency in identifying and addressing key areas of disadvantage in the workplace.

There is also a wider awareness, not only about the role that organisations play in creating a fairer society, but also about how important tackling the issue of pay gaps is to retaining their current employees and attracting future talent, as Jamie Mackenzie, director at Sodexo Engage, points out. He says: “Employers must work to build a culture of transparency. Regular check-ins on salaries via an anonymous assessment and benchmark comparisons can help map out what pay brackets are in place for various positions in an organisation.”

But awareness is only half the battle. Employers need to maintain this transparency and share an action plan of what happens next. “Will there be a [organisation]-wide salary review? Can employers give their people access to the data and market data to check their salaries are fair?” adds McKenzie. “Reporting a pay gap should be the first step [employers] take in tackling pay disparity, but not the only step.”

Disaggregate pay data

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However, according to Ruth Thomas, pay equity strategist at Payscale, the most effective action that employers can take is to disaggregate data to understand the nuances and outcomes for different groups and detect gaps between policy and practice that may contribute to pay gaps. This involves looking at both their uncontrolled and controlled wage gaps as they can present different stories about pay equity. “Only by analysing employee data can we move beyond anecdotal evidence and subjectivity to truly measure inequality and take corrective actions,” she says.

Additionally, at a time of transition, when many organisations are defining new working arrangements, employers need to look through the lens of equality and consider if every employee will benefit in the same way. Thomas adds: “For example, if you are embracing hybrid workforces, track who opts to take which package and whose pay gets reduced; women may gravitate to working from home due to the burden of care.”