The next steps on gender pay gap reporting

Last week, I spoke at the Alliance for Finance event on gender pay gap reporting. Over the course of two hours, representatives from across the finance industry discussed  gender pay gap reporting and how employers were working to improve inclusion across their organisations.

The topic that my colleague Alex and I presented on was ‘Does gender pay gap reporting work?’.

Currently in the U.K, gender pay gap reporting is mandatory for organisations with 250 or more employees. The most recent Gender Pay Gap Report, filed in October 2021, showed that pay gaps have decreased for the third year in a row.

13.1% is the median pay gap reported, with 56% of companies reporting a reduction in their gender pay gaps and 53% reporting a reduction in their bonus pay gaps.

The causes of the gender pay gap are complex and multifaceted, often originating in societal norms driving overrepresentation of men and women in certain types of jobs, often depending on factors like how flexible those jobs are or how well they can be fitted around childcare. This can then lead to men dominating the higher paid or more experienced roles within an organisation.

Criticism of gender pay gap reporting rules for not delivering on what they originally intended is understandable.  Gender pay gaps have not closed.

Yet the reporting requirement in the U.K. is weak compared to other countries. Mean gender pay gaps can be skewed by high earners, with a few high earners being able to obscure problems in the wider organisation.

As action plans or explanations for gender pay gaps are not mandatory, many organisations simply choose not to do it allowing for issues to persist.

This should not mean, however, that we abandon gender pay gap reporting entirely. What it should mean is that we view existing legislation as a vital first step, and work to build upon and improve it going forward.

A threshold of 250 employees before reporting gender pay gaps is high and could be reduced in line with best practice from other nations to examine the impact in wider society. Pay gap reporting could also be expanded to cover other characteristics, such as for BAME or LGBTQ+ people, and action plans to remedy gaps could be made mandatory.

It would be unfair to describe gender pay gap reporting as a failure. Ultimately the policy has achieved its goal of highlighting and beginning to bring down the gaps between men and women’s pay,; the gap has now reduced for three successive years.

Gender pay gap reporting has contributed to cultural change, fuelling greater openness around salaries,  and workers, particualrly women have been empowered with knowledge about pay gaps and are using this information to make decisions about where to work.

Ultimately yes, gender pay gap reporting does work. The legislation we have in place now in the U.K. should be considered an important first step towards workplace pay equality between men and women.

Now, we must build on this step to close the gap further and reduce the gap amongst other marginalised groups.

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