As current UK Prime Minister Theresa May puts it: “If you’re a woman, you will earn less than a man.”
Backing up May’s statement, research from the Institute for Fiscal Studies shows that on average, women in paid work receive about 18 percent less per hour than men. While this is down from 28 percent in 1993 and 23 percent in 2003, the report says that the gender wage gap is essentially the same for the mid- and high-educated as it was 20 years ago.
With the aim of leveling the playing field, the UK government has introduced new gender pay gap regulations. This legislation – which came into effect in April 2017 – requires companies with more than 250 employees to report their gender pay gap information via a gov.uk website.
This report must be filed by April 2018 and will be published on both a gov.uk website, and the company’s own website.
The data that has to be reported is:
- Gender pay gap (mean and median averages)
- Gender bonus gap (mean and median averages)
- Proportion of men and women receiving bonuses
- Proportion of men and women in each quartile of the organisation’s pay structure.
More information on this is available on the Government Equalities Office campaign page.
The data is already live and available to the public to view, with organizations such as Deloitte, The Commission for Equality and Human Rights, Department for Education, Pricewaterhousecoopers, The British Museum, TSB Bank, and Weetabix having reported their figures so far.
Do these gender pay gap regulations only affect the UK?
These particular gender pay gap regulations only affect companies and employees in the UK (or any company that has a large enough presence in the UK to qualify).
However, other countries have already enacted similar legislation – or have plans to do so.
According to the Financial Times: “Under Australian law, companies with more than 100 employees must report data on the gender composition of their workforce but also on access to flexible working conditions, sex-based harassment and discrimination, and a breakdown of men and women in management roles.”
New regulations in Germany called The Pay Transparency Act came into effect in July 2017. Under the law, companies with more than 500 employees will have to carry out checks and publish reports every five years.
In Scotland, public bodies with more than 20 employees are already required to publish gender pay gap data.
In the US, the Trump administration reversed Obama-era legislation that would require companies to report how much they paid people, along with their sex and race. This was a move supported by Ivanka Trump, despite her earlier commitment to closing the gender pay gap.
What are the challenges companies face?
Research has time and time again shown that improving diversity has a positive impact on businesses – McKinsey, for example, reported that companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.
However, while companies may be committed to improving the diversity of their workforce and reducing the pay gap, that doesn’t mean there aren’t challenges associated with these gender pay gap regulations, as well as issues with the way data is collected, or the type of information included.
Who to include
While the regulations are specific in terms of who should and shouldn’t be included, as well as what kind of pay to report, there are still doubts surrounding the collection and reporting of such information.
Siân Webb, partnerships manager at Gapsquare, a gender analysis software company, says: “Partners in law firms or accountancy firms are excluded as they are not considered an employee, as well as some pay elements like overtime. It is not just the case of taking someone’s annual salary and comparing women to men, but working out the average pay per hour. Getting to the point whereby you can actually calculate the gender pay gap is complex because of the complexities involved in the data collection.”
Law firm Baker McKenzie reports that its clients are making judgement calls on some of the more difficult technical calculations, especially around the types of pay that should be excluded.
It says: “Clients are, generally, taking some consistent judgment calls on some issues, for example, the exclusion of contractors from the data. However, on other issues, such as the approach to NERs, expats and sign-on bonuses, clients are taking a mixed approach or are undecided.”
Explaining why – the “narrative”
The second issue concerns providing an explanation for your data, which will more than likely show a gender pay gap. According to a recent survey by Mercer, the majority of UK companies see the need to create a narrative around their figures which is slowing down publication.
Webb says that as there will most likely be a gender pay gap, companies will then have to explain to stakeholders – internal employees, the board of directors even the wider public – why this gap exists and what they are doing to reduce it.
She explains: “The basic reporting requirements for the regulations are not detailed enough for companies to be able to see this, so they need to have a deeper understanding of the numbers to understand what the key issues are that have created a gender pay gap within their organisation.”
Chris Charman, principal and reward expert at Mercer, says: “Although committed to the principle of reporting, many UK companies feel the figures will show an overly simplistic view and so see a need to explain further to their staff and shareholders. Many companies are concerned about the risk of reputational damage when publishing their figures, especially as there still seems to be much confusion between the Gender Pay Gap and the legal requirement of equal pay for equal work.”
According to law firm Baker McKenzie, the majority of its clients are concerned about the distorting effect of some aspects of the calculations that may lead to misleading figures. The company says that come of the key distortion concerns include:
- Benefits funded by salary sacrifice being excluded
- Reduced bonuses paid to part time or absent employees being included without adjustments
- Income from shares being included in the hourly pay calculation if paid in April.
What are the the benefits to reporting this data?
While this data is aimed at shedding light on the gender pay gap to make inroads into closing it, the legislation and the corresponding reports will also bring general diversity and employee benefits.
Improves pay equality and fairness across the board
Georgene Huang, CEO and co-founder of Fairygodboss, a career advice and jobs board for women, explains: “When certain companies have voluntarily disclosed equal pay audits or pay gaps in the United States (as opposed to the mandatory requirements in the UK), those companies have typically benefited from positive PR and employee morale. Salesforce and SAP are two prominent examples.
“In other words, transparency and investment in this area pays dividends in terms of equity not just for women, but anyone who has been subject to a history of unfair pay at a company.”
Helps identify company-specific issues
According to Kirstie Stott, managing director of the Inspiring Leaders Network Group/Equilibrium, there is an opportunity for organizations to take it further than simply just reporting a gap, but to analyze and begin to understand what it means for them, and where the issues and challenges are.
“If organizations don’t understand fully, what the issues are then reporting becomes a simplistic gesture. Identifying key areas will enable a more robust and strategic approach to ensuring a culture which is diverse, equitable and representative of the populations they serve. ”
Highlights other areas of concerns
Webb believes that the main benefit of the gender pay gap regulations is that it is sheds light on the general difficulties women face in the workplace.
She says: “It exposes the lack of women in senior leadership (often cited as a reason for the gender pay gap within a company), the lack of part-time, flexible positions available within the company, the reduction of promotion opportunity for women who work part-time, occupational segregation etc. It therefore allows companies to start re-thinking equality and inclusion, how they approach diversity, how to make the workplace better not just for women, but for parents too.”
True measure of commitment to diversity
While large corporations such as Google and Microsoft publically publish their diversity figures, this isn’t the case for less well known and smaller organizations. Many companies state that they are committed to diversity in the workforce, and reducing the pay gap, but there is no evidence of this. This data will – despite its flaws – provide an indication of how fair pay is across organizations with more than 250 employees.
James Lloyd-Townshend, CEO of Salesforce recruitment firm Mason Frank, says “Companies have a responsibility to be fair and representative. This is a chance to test your operations and make sure you’re as fair as you may think. This is particularly important for corporates who should set a precedent for business as a whole. As a company that operates internationally, this is an exciting opportunity for us to set a standard in the countries we operate in outside the UK. It’s an opportunity to check yourself which is so important as a business servicing the others.
“This is ultimately an initiative for businesses to be accountable. It’s no longer going to be possible to position yourself as a pioneer for diversity. You’ll have to prove your commitment and be tested on it.”
Attracts talent to companies committed to gender equality
Stott believes that the new regulations will facilitate healthy competition for talent among organizations, with both men and women using the gender pay gap as a metric when weighing up job opportunities with certain companies.
She explains: “From a personal view point, I don’t think people will be surprised to see organizations with a gap, we know women are under represented in the work place, for me, I will be looking to see which organizations are transparent and looking to address the gap, this is what will stand out. Organizations should see it as positive opportunity to say, yes we have problem , but look at all the fab stuff we are doing to make it better, demonstrating a culture of openness and transparency.”
According to Huang, this is especially true due to the fact that women prioritize salary when looking for jobs: “Women tend to have more confidence when employers are transparent and our research shows that compensation is the number one most important factor to women job seekers.”
Will it really make a difference and how else can I reduce the gender gap?
According to data from Mercer, 74 percent of the 165 organizations it surveyed are in favor of the legislation in principle, but 52 percent do not think it will make a difference.
Baker McKenzie also reported that the majority of its clients think their organization’s gender pay gap will shrink, but only a little.
However, as Stott points out, there is confusion about the difference between equal pay for men and women doing the same job, and the gender pay gap.
She says: “The solutions to the gender pay gap are different to those required to ensure equal pay and so it is important for organizations that when they publish, people understand what the difference is. It may be surprising, but it is possible to have genuine pay equality and still have a significant gender pay gap.”
Acas has also provided the following tips on how your organization can reduce the gender gap:
- Make sure policies and practices are up to date
- Train and support managers
- Manage family-friendly leave successfully
- Make the most of flexible working
- Encourage and review career and talent development
- Minimize any negative impact from pay systems.
How can companies report the data?
Whether or not your company is in favor of the legislation, or whether you think it will will make a difference, it’s still a legal requirement to report the data, so it’s important to find a way to collect and report it in an efficient and accurate way.
- The difference between the gender pay gap and equal pay
- Do the regulations apply to my organisation?
- How to carry out gender pay reporting
- An explanation of key terms
- Essential considerations on how to reduce the gender pay gap
The guide also provides information on how to deal with overseas workers, snapshot data, bonuses, leave, working hours, and relevant employees.
How can HR software help?
HR software can help ensure that your company reports this data accurately and is compliant with the law, in a more efficient and effective way.
In a webinar, Ben Underwood, customer experience manager at UK-based HR software provider CIPHR, explained that without the right HR software in place, these reporting requirements have the potential to become an administrative burden.
He says: “the formulas are complex, they have changed since the draft was published.”
However, Underwood points out that the report produced is only as good as the data put in to create it so it’s important to have up-to-date pay information. It also depends on how each company stores its employee pay data, which can vary.
Webb explains that some companies are using Excel to produce the basic numbers, but that doesn’t actually tell them that much about why their gender pay gap exists.
She says: “Using software like Gapsquare allows them to break down their gender pay gap so they can view it by department. They can also look at the impact that occupational segregation may have on the gap, or by age, tenure or part-time/full-time work; and see if issues like the motherhood penalty exacerbates their gap. It is only when you start using the data that companies already have in their HR and payroll systems to truly understand workforce dynamics will you be able to explain their gap and therefore draw up tailor-made recommendations in order to eliminate it.”
How are HR software providers preparing?
A number of HR software providers have already added reporting capabilities to ensure their customers can produce gender pay gap reports.
“Available within our scheduled April release, the Reporting module now contains two new reports, designed exclusively to calculate the figures needed for gender pay reporting.”
Carval’s HR Software will provide Gender Pay Gap reporting.
“Cintra has provided software updates to help with establishing the snapshot figures for each employee, and with making the calculations. As part of our outsourced services, Cintra is offering Gender Pay Gap Reporting for our clients. The service is currently being designed along with associated costs. We are also in the process of formulating Gender Pay Gap Reporting workshops.”
CIPHR has created a gender pay gap report that offers:
- Reporting in just a few clicks
- Overview of differing legislation and calculations required (6 in all covered by CIPHR reporting)
- Report automatically calculates based on existing employee data stored in system
- Ability to filter employees (able to remove employees on reduced rate of pay or nil rate of pay or execs not on ‘normal’ pay) when running report
- Report presented in Excel to allow easy sharing and analysis
- Easy to understand report format
- Set reminders or even report automatically at set intervals to remain compliant.
“Can your current payroll or HR software produce a test gap analysis using previous year’s pay data to give an indication of what the numbers might look like, which might help to shape company policy? A powerful payroll analytics and reporting platform may be able to help you generate these reports automatically.”
Natural HR’s powerful analytics tool can support businesses to simplify Gender Pay Gap Reporting in just a few clicks.
“We like to take the administration out of HR so that you can focus on adding value. So, we’ve built the gender reporting requirements into our software so that you can have your data, however, you might like to see it, in real time at the click of a button.”
Next steps to meeting the gender pay gap regulations
Let us know if you have any questions regarding the gender pay gap regulations by leaving a comment below or emailing firstname.lastname@example.org.
If you’re shopping for a new HR system, you can check out:
- GetApp’s HR scorecard to help you shortlist software providers
- GetApp’s ranking of the top 25 HR apps.
If you’re worried that your payroll system does not hold up-to-date information and you think you’ll need a new system then check out:
- Independent reviews of payroll software.