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Out-Law Analysis 6 min. read

Gender pay gap reporting has 'explosive' but positive effect

ANALYSIS: Gender pay gap (GPG) reporting in the UK has had an explosive effect in terms of shining a spotlight on the issue of female participation and progression in the workplace and holding companies to account. Put simply, the rules are a game changer. 

The first deadline under the GPG reporting regulations passed on 4 April. Of the 10,000 + employers who published their data - over 1000 of them in the final 24 hours before the deadline - more than three quarters pay men on average more than women. There are also stark differences in gender pay across sectors. More details of our analysis are set out below.   

The GPG regime has also helped to highlight a number of broader issues, from the way organisations are structured to deep-rooted societal issues, including how to encourage more women to study STEM subjects and to pursue careers in more male dominated professions, how to facilitate better access to childcare and flexible working opportunities, and the need for greater shared parental responsibility.

While GPG reporting has generated considerable media attention in the build up to the first reporting deadline and that deadline has now passed, we can expect employers to come in for even greater scrutiny when they publish their data for 2018.

The GPG reporting requirements

The gender pay gap reporting regulations apply to private and voluntary sector employers with 250 or more employees. Public sector employers are subject to a similar duty under separate legislation.

The regulations require employers to publish their overall mean and median pay gaps based on gross hourly pay for men and women, expressed as a percentage; as well as their mean and median gender bonus gaps. They are also required to publish the proportion of male and female employees within each quartile of your pay distribution, ordered from lowest to highest pay, as well as the proportion of both men and women that have been paid a bonus in the preceding 12-month period.

GPG information must be reported annually. The first reports had to cover GPG information as at 5 April 2017, and had to be reported by 4 April 2018. The next reporting period applies to employers' GPG position as at 5 April 2018 and must be reported by 4 April 2019.

Employers are required to publish the information on their own website and also submit it to a portal set up for centralising the data by the government. The submitted data displayed on the government portal is standardised. However, employers can provide a link to more detailed information on their own website. Employers therefore have an opportunity to contextualise the data, place it in its historical context and set out action plans to tackle any problem areas.

Analysis of the 2017 GPG data

Based on the published data, nearly eight out of 10 employers pay men more than women with an average median pay gap of 9.7%. 14% of employers reported a pay gap in favour of women and just 8% of reported no gender pay gap. .

The UK has a national average median pay gap of 18.4%, Of the 10,014 companies and public sector organisations which published their pay gap, over 30% reported a median pay gap in excess of that national average.

The sector with the biggest GPG is construction, with an average median gap of 25% followed closely by the financial services sector with a median pay gap of 22%.  Particularly large bonus gaps were also recorded in these sectors. 

The highest median pay gap was recorded by Millwall Holdings plc, the parent company of Millwall FC at 80%. Ryanair posted the worst pay gap in the transport sector with a median pay gap 71.8% and JP Morgan revealed the biggest pay gap among the major banks with a median pay gap of 54%. The gaps reported by some women's fashion and beauty brands, including Karen Millen, were also within the worst 2% of all companies.

The data also revealed that underrepresentation of women is a particular challenge in many sectors, including, the technology sector – 71% of Apple's top earning employees are male.

Better performing sectors include health, accommodation and food services. Female employees in the accommodation and food services sector earned just 1% less than male employees, according to the data.

Many high street brands, including KFC, Costa and Starbucks, reported no gender pay gaps.

Examples of voluntary disclosures

Employers have been encouraged to publish a narrative alongside their data to provide additional context and explain what corrective action they are taking.  For this reason many companies have disclosed extra information that goes beyond the requirements of the regulations.

Some employers have elected to provide statistics that are broken down by job level or additional statistics that do not include more senior roles. 

Others have chosen to provide global statistics for their entire group of companies or to produce statistics for companies with fewer than 250 employees to demonstrate that they are acting in the spirit of the regulations and being as transparent as possible.

Some employers have disclosed that they have joined workforce diversity campaigns such as the 30% Club and the Woman in Finance Charter.

There have also been employers that have chosen to confirm that they have undertaken an equal pay review and that they are satisfied that the gap is not indicative of an equal pay issue. This helps to educate the workforce and discourage equal pay challenges.

Beyond gender pay

While there is a distinction to be drawn between gender pay and equal pay issues, the GPG reporting regime has served to shine a spotlight on the wider issue of equal pay.

Most employees want to know that they are receiving equal pay for equal work and this is resulting in discussions within organisations as to how they ensure this. 

They want to understand what pay review processes look like, what checks and balances are in place to ensure that the process is fair, and what is being done to ensure there is no unconscious bias in the setting of pay and whether their organisation carried out an equal pay review.

Organisations are now much more likely to get asked questions of this nature and need to be able to respond. Slowly, we are moving towards a culture where discussions about pay are no longer a taboo subject – based on current trends, employees will feel increasingly confident in discussing pay matters with colleagues and managers alike and in questioning any disparities.

Future GPG reporting, enforcement and scrutiny

There was understandably a lot of trepidation this year as employers were going into the GPG reporting process blind – they had no idea what their statistics would look like or how they would compare to their competitors. However, the stakes will be even higher when companies report their 2018 data.

Assuming companies have complied with the 2017 reporting obligation, there will be a point of comparison available and it will be easy to discern whether the action plans outlined in employers' 2017 reports have had the intended impact, or whether they have been followed through with at all.

However, it must be remembered that the impact from any action plans is likely to be limited given the time it takes for them to be implemented – results are unlikely to be immediate. 

In the short term, however, the focus of attention on GPG issues is likely to shift towards those employers that failed to meet the 4 April deadline this year. There are varying estimates over how many employers have failed to report, although it could be more than 3,000.

The Equality and Human Rights Commission (EHRC) is responsible for ensuring that employers publish their GPG report. Failure to comply with the duty constitutes an unlawful act, and the EHRC has powers to take enforcement action.

The EHRC will be writing to employers that have not submitted their reports on Monday, and employers will have 28 days to respond. Employers that reported implausible GPG figures also face potential enforcement action.

New league tables highlighting the GPG information of around 8,000 businesses are to be published later this year, the UK government recently announced. This, in addition to the EHRC's enforcement action, will lead to ever greater scrutiny for the worst GPG offenders.

However, the driver behind the GPG reporting regulations was not to 'name and shame' poor performing companies, although that will be inevitable to some extent. The main objective was instead to shine a spotlight on and accelerate progress in the area of gender equality.

The success of the regime will be measured in time by whether it has helped to bring more women in to male dominated sectors and more women into higher earning senior management positions through increased focus on flexible working, support for maternity leavers, mentoring, unconscious bias training and target setting. It is not meant to be a quick fix. The intention is to generate sustained progress over time.

A UK parliamentary committee has opened a new inquiry on the effectiveness of the GPG reporting regulations. It will look at, among other things, whether employers should be required to publish other information beyond what the current rules require.

UK prime minister Theresa May has already suggested that, in addition to GPG reporting, companies and public organisations will have to move towards reporting pay gap information by ethnicity, age and job grade. 

Organisations better get used to these new forms of accountability driven by the government’s transparency agenda. It looks as though gender pay is just the beginning of this story. 

Susannah Donaldson and Helen Corden are gender pay gap reporting and employment law experts at Pinsent Masons, the law firm behind Out-Law.com.

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