The gender gap: coming clean

“What gets measured gets done.” But will this maxim hold true when a company is obliged to report their gender pay gap?

In a surprising turn of events, a late amendment was accepted during the House of Lords debates on the Small Business, Enterprise and Employment Bill, enabling s 78 of the Equality Act 2010 to come into force.

This is the provision which states that private sector employers with more than 250 employees must publish their gender pay gap. The move was welcomed by a number of equality campaigners, trade unions and even Grazia magazine, which had petitioned the Government for change.

It is hoped that legislative intervention will have a greater impact than the limited success of the Government’s voluntary initiative: Think, Act, Report. Although 270 companies signed up, over a four year period only five companies published their gender pay gap.

Anyone who remains unconvinced that legislation is necessary to tackle the pay gap needs look no further than the statistics. Despite the Equal Pay Act being in force for more than 40 years, the full time pay gap for all female employees in the last 10 years has slowly reduced by a mere 6%, and currently sits at 19.1%. Or, to put this in context, last year women worked from 7 November for free, in a day that is now being recognised as Equal Pay Day. Reporting on this issue last year, the Telegraph perhaps summed it up best with its headline: "Women: Like Men, Only Cheaper".

Why publish the pay gap?

Publication is aimed at increasing pay transparency – particularly in the private sector where pay is individualised and pay secrecy is the norm. Although the Government abolished pay transparency clauses a couple of years ago, this did little to change a culture where pay is so intrinsically linked with an employee’s view of their self-worth that people simply don’t want to talk about it, even if they are free to do so. As such, individuals are not pressing for change because they are not even aware that there is a pay disparity.

And because of this lack of individual challenge, or any wider compulsion to act, many organisations are similarly unaware of gender pay gaps or whether hot spots exist within their organisation.

Why has there been a reluctance to publish?

Publication is not an end in itself, and crucially it is what an employer does with the pay gap information that will make a difference. Perhaps this reluctance to publish is based on the misconception by employers that publicly admitting a pay gap is tantamount to inviting a raft of individual equal pay claims.

The pay gap figure is a collective figure and, in my view, the organisational response should trigger action at a collective level. Many factors influence the pay gap, such as (horizontal) occupational segregation where women cluster in certain types of role like childcare and cleaning, but are less prevalent in areas such as IT. Vertical occupational segregation is another factor where women are well represented at entry level but fail to maintain this representation at senior levels, something that is particularly prevalent in the legal profession.

The clustering in lower levels or in particular roles is linked to what is known as “the motherhood penalty”, where women who take time off to look after young children are penalised for taking time out of the workplace, and then penalised again by their desire to work part-time and accommodate childcare. It is not a coincidence that the ONS pay gap figures for employees between the ages of 18-39 is considerably lower than the pay gap figures for the age 40 and over categories. Solving these problems goes beyond the realm of equal pay legislation, to looking into the structure of work and flexibility, career paths and progression.

That is not to say that a large gender pay gap figure may prompt an individual to look at their own personal circumstances, and bring an equal pay claim. Of course there can be a link, but an equal pay claim has very specific and difficult legal tests to satisfy which are based on finding a comparator and establishing that a woman is paid less than a man where they are carrying out like work, work of equal value or work rated as equivalent. The reality is that for many employers the potential risk of claims will be the main trigger in moving away from inaction on pay.

How will the measure work?

The detail will be contained within regulations, with the Government committing to carry out a consultation process before implementation. It has also committed to producing a 12 month lead-in time to give businesses time to prepare.

It is likely that the regulations will stipulate the descriptions of pay gap information which should be published (for example whether it is full time, part time, across gradings such as managerial staff etc), the time at which information is to be published (for example whether this is to be annually), and the form and manner in which it is to be published. Employers who fail to publish this information will face fines of up to £5,000.

Next steps?

Employers who have never carried out an equal pay audit or analysed their gender pay gap should do so now, before s 78 is brought into force. The Law Society of Scotland has recently published a free new guide on how to do this called Ensuring Fairness, Closing the Pay Gap, along with encouragement for firms with over 150 employees to publish data, something which may become a rule in time. If there are obvious areas where a pay gap discrepancy exceeds the norm then action should be taken before publication. General advice can also be found in the guidance accompanying the Think, Act, Report initiative and the Government's Equal Pay Portal.