It’s been 7 years since the Government introduced annual Gender Pay Gap reporting regulations for companies with 250+ employees, and whilst the national median pay gap has narrowed since then, progress has been somewhat subdued with an overall decrease of just 4%. But why is this the case?
Whilst it is mandatory for eligible companies to calculate and publish the six headline gender pay metrics, what isn’t yet compulsory is for these companies to produce reports explaining their pay gaps or share action plans that focus on how they intend to reduce them. Outside of gender, there are still no other pay gap reporting requirements as ethnicity and disability reporting remain voluntary in the UK. To this extent, organisations can technically get away with fulfilling current pay gap requirements as a ‘tick box’ compliance exercise and shrug off placing importance on targeting why those gaps exist.
That being said, not all companies take this approach. ED&I strategies and pay transparency initiatives have gained a lot of traction at the top of HR agendas as companies recognise the benefits that a diverse and fair working environment can bring. According to McKinsey’s most recent diversity report, companies with strong gender and ethnicity diversity are now 39% more likely to financially outperform their peer companies in the lowest ethnic/gender diversity quartiles. However, unless more companies commit to taking long-term, targeted action to change their pay gaps, our progress towards eliminating pay differentials will likely take decades.
So what actions can companies take to close pay gaps?
Greggs is a good example of a company that has made significant steps with their gender pay results recently, reducing their median pay gap by 15% to 2.8% this year after introducing initiatives to encourage more females for senior management roles. Raconteur also named Boots Management Services – which employs all pharmacists and pharmacy staff - as one of the top 10 most improved large companies. They reported a 0% median pay gap this year and introduced a number of schemes to support female employees including discounted childcare and covering prescription costs for menopause medication. Meanwhile, a recent report from the Fawcett Society calls out making flexible-working options the default for higher paid roles as the fundamental change needed reduce the national gender pay gap, as women are more likely to look for part-time work due to caregiving responsibilities.
What is important to recognise, however, is that there is no ‘one size fits all’ solution to closing pay gaps. There can often be a complex series of factors and business practices causing differences in pay. So, companies must start by doing one thing to understand what is truly driving the gaps: analyse their data on a deeper level.
Knowing where to start with this additional analysis can be daunting, but taking the time and effort to dig deeper into the data will help you to identify the key problem areas and put you in a good position to formulate actions that target these issues. As a starting point, we recommend considering the following four areas of analysis:
Pay equity by department and level
- Are there specific job levels where pay differences exist?
- Are there specific departments where pay is generally higher?
- Are these predominantly male or white employee dominated?
In cycle vs out of cycle pay increases
- How often are pay increases given to employees by gender and ethnicity?
- What is the average increase given by gender and ethnicity?
- Are discretionary pay increases awarded? Are you confident these are fairly and equitably applied?
- Are pay increases being awarded in specific departments, e.g. male dominated?
Internal progression and promotion
- What percentage of men and women / white and ethnic minority employees have received internal promotions?
- How long are employees staying in roles before being promoted by gender and ethnicity?
- Are women/ethnic minority employees being promoted at lower levels while men/white employees are being fast tracked to more senior levels?
Recruitment practices
- What is the gender/ethnicity split of new hires in higher and lower paid roles?
- What are the first-year retention rates by gender and ethnicity?
- Are more roles being targeted at male or white candidates?
- Are you advertising part time and flexible working opportunities to appeal to more employee groups?
Whilst most gender pay gaps reflect the distribution of gender across an organisation, making changes to policies and practices has been shown to have an impact. If your pay gaps are stubbornly not changing, it’s time to look deeper. If you would like expertise and assistance to help with your pay gap needs, please visit our Gender Pay Gap Reporting page, or contact us here.
