Gender Pay Gap Report Highlights Lack of Equality in the Workplace
On 2 August 2018, the House of Commons’ Business, Energy and Industrial Strategy Committee (“Committee”) published a report on gender pay gap reporting. This report is the first output of the Committee’s inquiry into aspects of executive pay and gender pay gap in the private sector. As from 4 April 2018 all companies, in GB only at this time, with over 250 employees are required to report their gender pay gap. The publication of gender pay gap statistics on an organisational level shines the spotlight on individual organisations who will now be subject to public scrutiny.
At its simplest the gender pay gap measures the difference in hourly earnings of men and women. This considerable gap is well established at aggregate level, with the median across the economy coming in at 18.4% in favour of men. Alarmingly figures reveal that gender pay gaps of over 40% are not uncommon in some sectors, with 78% of organisations reporting to the Committee having gender pay gaps in favour in men.
The UK is guilty of one of the highest gender pay gaps in Europe, which demonstrates not only a lack of fairness, equality and diversity in the workplace, but also leaves the economy lagging in utilisation of the talents of women thereby stunting career progression and economic performance.
Many companies will have been surprised to find they had a gender pay gap at all, and no doubt many would have no idea how such gaps emerged; still less, how to close them. The Committee’s report advocates that each organisation looks hard at its own policies, practices and working culture to establish what action needs to be taken. Each organisation is different and will have different issues to address. Whilst it is up to businesses to address their own pay gaps, they can expect to have access to advice and support from experts, and to build upon the growing body of best practice evidence. This is disseminated by sector bodies and business organisations and campaign groups such as the 30% Club, or the Hampton-Alexander Review into board diversity.
So what practical steps can be taken? The Committee’s report highlights a number of progressive measures which can be taken by companies, recommending that company boards, investors and regulators drive change in tackling the gender pay gap. Examples include:
- the Financial Reporting Council’s (“FRC”) proposals for a revised Stewardship Code due later in 2018 should include refer to gender diversity being properly reflected throughout the company, notably at board level;
- company boards should introduce key performance indicators for reducing and eliminating their pay gaps and remuneration committees, in reporting on pay policy, should explain how this commitment to reducing the pay gap is being reflected in their decisions;
- urging the FRC to monitor the quality of reporting on gender diversity and the pay gap in annual reports and to press for improvements where necessary. The Committee supports the recent changes to the UK Corporate Governance Code to improve reporting obligations on actions taken to increase diversity in the management pipeline. However it also believes that the revisions do not go far enough, and suggests that the revised Code should include specific provision for reporting requirements to include measures to be taken to address any gender pay gap.
Social attitudes have changed significantly since the passing of the Equal Pay Act in GB in 1970 and are still undeniably changing. Yet, fifty years on the role of women in the workforce is still very different to that of men. The gender pay gap does not tell us if women are being paid less than men for the same work but it does highlight the difference in roles between the genders, including the prevalence of women in part-time work and the lack of women in senior roles. With that in mind the Committee will continue with the second strand of its inquiry, examining progress of reforms relating to executive pay levels and structure, in the autumn of 2018.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.