Mind the Gap-Is Mandatory Gender Pay Reporting the right step forward in equality?

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There continues to be a gap between what a man and what a woman earns in the workplace. It now stands at 19.1% for full and part time workers in the UK, this means that a woman earns 80p for every £1 a man earns. It is now forty years since equality laws were passed in the UK. By early 2016 there will be new regulations that’ll force companies with more than 250 employees to publish gender pay gap information. This will be a great change from the voluntary approach that companies were previously encouraged to publishing.

The coalition government introduced gender pay reporting under a voluntary scheme, in the Think, Act, Report Scheme. It was reported in August 2014 that only five companies (Tesco, PWC, FriendsLife, AstraZeneca and Genesis) had published their gender pay gap information by their own accord. More than 275 companies had signed up to the scheme but did not publish their gender pay gap information. Labour came up with an amendment to the bill to introduce mandatory gender pay. It gained support from the equality commission and was backed by different MPs from across the parties. This then resulted in the Liberal Democrats to prompt the government to introduce section 147 of the Small Business, Enterprise and Employment Act 2015 (SBBEA).

The Law 

Section 147 of the SBBEA requires the government to carry out its powers under section 78 of the Equality Act 2010 to make regulations for employers with 250 or more employees to publish information on gender pay gap within 12 months of the Act coming into the force. The Act received Royal Assent on 26th March 2015 meaning that the regulations must be made by 25 March 2016. Section 147 of the SSBEA and section 78 of the Equality Act has not been brought into force. The government has said that they are planning to for a consultation to be published in the summer of this year and regulations to be done by early 2016. This was confirmed by Nicky Morgan, the Minister for Women and Equalities.

Right Step forward

The move to make gender pay reporting mandatory has long been resisted by parts of the Conservative party and several businesses. The difference in the gender pay gap is the sixth highest behind Italy and Portugal. In the private sector, the gender pay gap for full time employees is 17.5% and when looking at it by occupation the figures for 2014 show that pay gap for those in full time management roles is around 16% and 25% for those working in skilled trades. Women are still working in badly paid roles compared to men who dominate skilled and professional roles. The Fawcett society has said that the latest figures suggest that the gap still relates to the stereotypes around men’s and women’s roles and their values in the workplace. According to its studies, figures show that women make up 78% of those working in social and health care whilst men account for 88% of the better paid industries of science, technology and engineering (STEM).

The architecture profession for instance women accounted for 41% of the profession in 2014 at the junior rank of a Part 1 qualified architectural assistant and as the roles become more senior the percentage falls ( they made up 35% of qualified architects, 26% of senior architects and 13% of equity partners or shareholder directors). The situation gets even worse in the engineering profession where in a 2.3 million strong industry, only 6.7% of it is women. According to the Institution of Mechanical Engineers, women make up 15% of the country’s graduates yet only 1% are chartered medical engineers. Employers should be encouraged to address restrictions on flexible working and costs of childcare, so that the pay gap between men and women becomes more equal.

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The mandatory gender pay reporting is the right step forward and should be welcomed. It will improve the big gap between men and women’s pay. It will also promote transparency by forcing companies to identify gender pay issues in their organisations. David Cameron said mandatory gender pay gap reporting is “ a really big move” and will “cast sunlight on the dispreprenancies and create the pressure we need for change, driving women’s wages up”. Labour has also welcomed the move but added that the Conservatives were slow to act on gender pay transparency.

The legislation will not require for instance long and detailed equal pay audits which trade unions have been campaigning for a long time. To understand what is going on in the workplace, we need more than one single figure or even just figures. There are other factors that may contribute to gap in pay such as the impact of motherhood and family responsibilities on women’s paid work or that companies are failing to provide equal pay and this is the cause behind the gap between men and women’s pay. These factors should also be taken into consideration when an employer is reporting on its gender pay gap. The government has yet to decide whether they will make big companies publish a single figure or a number of figures relating to each pay grade. Nicky Morgan has suggested that the figures could be released in bands meaning that pay will be compared at each grade rather than an overall figure.

In looking on how to improve the gender pay gap in Britain we must also start from the beginning-education. The government especially the Education Secretary and the Minister for Women and Equalities should encourage schools, colleges, sixth forms and universities to address occupational segregation.

The Reaction

Petra Wilson (Chartered Management Institute)  told the Guardian:

We welcome David Cameron’s announcement that new legislation will require every company with 250 employees or more to publish the gap between average female earnings and average male earnings. But businesses should report on more than just average pay rates. Given that the gender pay gap is widest at the top, it’s vital that companies track pay across different job levels. And, of course, the pay gap isn’t the only problem facing women at work, as the lack of women in senior roles is still a huge problem.

Transparency is the most powerful driver we have for achieving change, and this legislation will be good news for business. The new measures will help unblock the talent pipeline. Clearer employee data, improved recruitment and a reinvigorated focus on business culture will pay dividends for all employees. The evidence is clear: diverse teams make better decisions and deliver better results for businesses.

John Allen, chairman of the Federation of Small Businesses

We need to keep up the momentum and break down the remaining barriers that prevent women progressing in the workplace and the boardroom”.

Gloria De Piero, shadow Minister for Women and Equalities

said it was “good news” ministers had “finally embraced pay transparency after shelving the Labour legislation for five years”.

“For pay transparency to make a real difference, we need to have an annual equal pay check which measures progress and recommends what action needs to be taken – a move the government voted against earlier this month”.

Jo Swinson, former Lib Dems Equalities minister

said: “Saying we can afford to wait for another generation to close it is, to put it mildly, unambitious. The UK economy is currently missing out on the talents of too many women. In government, my Lib Dem colleagues and I fought tooth and nail with the Conservatives to get them to agree to even minimal changes to help close the gender pay gap”.

Kate Andrews, The Adam Smith Institute

“Forcing businesses with more than 250 employees to publish their ‘pay gaps’ will only promote more myths and confusion. There is no such thing as an ‘average salary’; education, previous experiences, negotiating tactics, and unique abilities all contribute to one’s salary, none of which can be known by comparing John and Jane’s annual take-home pay on a spreadsheet.

“Furthermore, men and women often choose to make different career decisions – usually based on flexibility and rigour – so they can embrace other, equally meaningful parts of their life; this, naturally, can be reflected in their pay.”

What does it mean for employers and employees?

In whatever method the government decides for companies to publish their gender pay gap information there will be issues in terms of recruitment, reputation and retention. If there is a big gap, this is likely to have an effect on a company’s retention and ability to recruit. It will also highlight the company’s commitment to diversity and to gender equality. In addition, it will bring transparency and scrutiny to the way companies pays its employees.

Mandatory gender pay reporting could mean large costs for big employers and could expose them to sex discrimination and equal pay claims.  By big companies publishing their gender gap information, employees will be able to access the information and if they are feel they are being paid lower than their comparator group it could potentially mean there will be several pay settlements. Large costs for the big companies are likely to arise if the audit is a detailed and sophisticated one, there is a also a fear that it will be time consuming for companies too.

Indeed, the government’s plan to force big companies to publish gender pay gap information is a positive step forward in gender pay and is welcomed. However it does not make equal pay a reality. More will need to be done to encourage employers for their to be equal pay parity between men and women.

Images: www.guardian.com (Joe Giddens/PA), www.bbc.co.uk

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